In a statement Wednesday, the central bank said "inflation will remain subdued for some time," settling the bets on Wall Street on whether or not wholesale price inflation of 2.4 percent in November would provide an incentive for the bank to raise rates.
The Fed kept lending rates at between zero and 0.25 percent and said it would continue with a program to buy $1.25 trillion in mortgage-backed securities, although the pace of the program is "gradually slowing ... to promote a smooth transition in markets," the committee said.
The Fed said improvements in financial markets meant it could "anticipate" ending special liquidity facilities on Feb. 1, 2010.
In its comments on the state of the U.S. economy, the Fed said "deterioration in the labor market is abating." In addition, the housing sector is improving.
"Modest income growth, lower housing wealth and tight credit," was hampering economic progress, although "financial market conditions have become more supportive of economic growth," the statement said.
Copyright 2009 by United Press International.
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