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Fed holds rates at historic low

The US Federal Reserve will preserve "for some time" its main lending rate at almost zero - between 0 and 0.25 percent - to counter the slump in global demand. The Fed will simultaneously continue its efforts to revive credit.

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AFP - The US Federal Reserve voted Wednesday to hold its base lending rate near zero and pledged to "employ all available tools" to spark an economic rebound.

Concluding a two-day meeting, the central bank's policy committee kept its target range for the federal funds rate at zero to 0.25 percent agreed last month and said its expected "exceptionally" low rates "for some time."

A statement by the Federal Open Market Committee said the Fed "will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability."

The Fed, which has embarked on a major program to buy mortgage securities, said it was "ready to expand the quantity of such purchases" and "is prepared to purchase longer-term Treasury securities" if it will help revive credit.

The statement appeared to stop short of an outright move toward what is known as "quantitative easing," or the massive purchase of Treasury obligations in an effort to bring down borrowing costs that are not linked to the federal funds rate.

But the Fed said clearly it was prepared to take such a move if circumstances warrant.

The statement said data since last month "suggests that the economy has weakened further" with hefty declines in output, housing and employment, "as consumers and businesses have cut back spending."

Yet the committee said it "anticipates that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant."

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