economists predict the Fed will leave its target range for its banking
lending rate between zero and 0.25% through the rest of this year. The
rationale: a super-low lending rate will spur Americans to spend more,
which would support the economy.
If the Fed holds its key rate steady, that means commercial
banks' prime lending rate, used to peg rates on home-equity loans,
certain credit cards and other consumer loans, will stay around 3.25%,
the lowest in decades.
It was the first Fed meeting since the economy has flashed more definitive signs of turning a corner.
But dangers lurk.
Although consumer spending has stabilized, job losses, sluggish
income growth, hits to wealth from tanking home values and still
hard-to-get credit could make Americans cautious in the months ahead,
the Fed said.
The Fed expressed confidence that its low rates and other
aggressive actions so far will gradually help bolster the economy. Even
so, economic activity probably will "remain weak for a time," the Fed
Against that backdrop, the Fed said inflation was likely to
stay "subdued." Fed policymakers predicted that idle factories and the
weak employment market would make it hard for companies to jack up
While unemployment dipped to 9.4% in July, the Fed says it is
likely to top 10% this year because companies won't be in a rush to
The Fed didn't make any changes to another program that aims to push down mortgage rates.
In that venture, the Fed is on track to buy $1.25 trillion worth
of securities issued by mortgage-finance companies Fannie Mae
Freddie Mac by the end of the year. The central bank's recent purchases
have totaled about $542.8b.
It also didn't offer signs about the fate of another program
intended to spark more lending to consumers and businesses at lower
The Term Asset-Backed Securities Loan Facility, which had
gotten off to a slow start in March, is slated to shut down at the end
of December. Despite the TALF, many people are having trouble getting
loans, analysts say. More recently, the program was expanded to provide
relief to the commercial real-estate market.
The Fed has been weighing whether it should end some of its
revival programs now that signs are growing that the economy is on the
Factory activity is improving. Home sales are starting to pick
up, although much of the activity involves people snapping up
bargain-priced foreclosed properties. Companies are cutting far fewer
Some financial stresses also are easing, but lending is not flowing normally and financial markets aren't back to full throttle.
Many analysts believe the economy - which logged a mild
contraction in the second quarter after a dizzying free-fall in the
prior six months - is growing now.