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Fed sounds cautious note

THE US Federal Reserve said last night that the recession was easing as it kept interest rates on hold, but warned that economic activity would &ldquo;remain weak for a time&rdquo;. <br /><br />It also vowed to press on with its strategy of buying up mortgage-related debt and government bonds.<br /><br />America&rsquo;s central bank, chaired by Ben Bernanke, kept interest rates at between zero and 0.25 per cent and calmed fears about the possibility of deflation.<br /><br />But it said inflation would remain &ldquo;subdued for some time&rdquo; and forecast that rates were likely to remain at their current level for &ldquo;an extended period&rdquo;.<br /><br />The Fed also said it would push ahead with its promise to buy up $1.45 trillion in mortgage-related debt by the end of the year and $300bn in government debt by autumn. It added that conditions in financial markets had improved.