Fed Leaves Rates Near Zero

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The Federal Reserve kept its key interest rate near 0% Wednesday, and said it is prepared to take additional steps to try to fix the troubled U.S. economy and credit markets.

The Fed said it stands ready to purchase longer-term Treasurys if it determines that such a move will help get credit flowing once again. This may help lower the yield on the government bonds and further lower the rates on various types of loans tied to Treasurys.

Still, Treasury yields moved higher in the wake of the Fed decision, while Treasury prices, which move in the opposite direction, lost ground.

Experts said this was due to disappointment among some bond traders that the Fed did not announce specific plans Wednesday to buy Treasurys.

“They didn’t say when and how much they would buy; they said they are prepared to do that,” said Kevin Giddis, managing director of fixed income at Morgan Keegan. “The reality that they didn’t give definitive terms has people running for the hills.”

The central bank also gave a bleak outlook for the U.S. economy, saying that while it expected a “gradual recovery” to begin later this year, significant risks remain.

(CNN Money)