By CountingPips.com
The U.S. Federal Open Market Committee concluded its monetary policy meeting by holding the U.S. interest rate steady at its record low level and by announcing the slowdown of its liquity and spending activities. The FOMC had cut the interest rate to the target range of 0 percent to 0.25 percent in December 2008 and today’s decision to keep the rate unchanged was widely expected by market forecasts.
The Fed statement on the economy said that “Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is 
abating. The housing sector has shown some signs of improvement over recent months.” The Fed, despite the more optimistic tone, also maintained that “economic activity is likely to remain weak for a time”.
The Fed announced that the program of buying $1.25 trillion in mortgage-backed securities and up to $175 billion of agency debt in an effort to keep mortgage rates low and support the housing markets would start to be slowed down. The slower pace of purchases is intended to allow a “smooth transition” in the markets that are trying to get their own footing and that the end of the program will be at the conclusion of the first quarter of 2010.
The Fed reiterated that the special liquidity facilities that were announced in June will end on February 1, 2010 while also looking to close down temporary central bank liquidity swaps by the same date.
The raising of interest rates may be some time in coming as the Fed once again maintained the familiar phrase that interest rates would stay at low levels for “an extended period” as inflation has not become an issue.
