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Federal Reserve to keep interest rates near zero for extended period

WASHINGTON — The Federal Reserve stood by its policy of keeping interest rates at rock-bottom levels for the foreseeable future at its policymaking meeting Tuesday, even as central bank officials said that the labor market is stabilizing.

The Federal Open Market Committee left its target for short-term interest rates unchanged near zero, where it has been for the past 15 months. Fed officials also repeated language from previous statements that rates are likely to remain "exceptionally low" for an "extended period," which they have said means at least six more months.

On balance, the Fed's assessment of the economy seemed slightly better than it had been. The U.S. unemployment rate has edged down in recent months to 9.7 percent, and forecasters expect the nation to have added jobs in March. That helps explain why the officials said that the job market is stabilizing, in contrast to their January meeting, when they said that "deterioration in the labor market is abating."

Similarly, the officials noted in a statement released Tuesday afternoon that "business spending on equipment and software has risen significantly," an upgrade from January when they said that such spending "appears to be picking up."

But the economic assessment was not universally sunny. Fed leaders noted that investment in commercial real estate is declining, housing starts have been "flat at a depressed level," and employers have been slow to hire.

There was no sign that this improved assessment will change the direction of Fed policy any time soon. With unemployment high and inflation appearing to be a decent threat, most Fed leaders are in no hurry to raise rates. But the statement did affirm the Fed's intent to unwind some of the more exceptional programs it put in place to support economy during its deep decline last year; the purchases of $1.25 trillion in mortgage-backed securities, most notably, will conclude at the end of March.

Federal Reserve to keep interest rates near zero for extended period 03/16/10 [Last modified: Monday, March 22, 2010 5:39pm]

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