Just hours before kicking off its first-ever press conference with the media, the Federal Reserve on Wednesday offered some news that was not nearly as hotly anticipated: interest rates are staying where they are.
The central bank, as expected, decided to hold rates steady, in a range of 0-0.25%, where they have been since December of 2008. In making the move -- or non-move -- the Fed said the economy is showing signs of recovery, but still faces daunting challenges. (The decision, typically announced around 2:15 p.m. ET, was unveiled earlier because of this afternoon’s press conference.)
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"Household spending and business investment in equipment and software continue to expand," the Fed said in its statement. "However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued."
Economists -- and even members of the Fed itself -- differ on the need and the success of the so-called “Quantitative Easing” programs engineered by the Fed, controversial moves (at the most basic level, simply printing more money) intended to stave off an even worse financial crisis than the one experienced in recent years.
One of the concerns surrounding this unprecedented step, however, is that the excess money sloshing around the world will eventually lead to inflation. Supporters say the Fed can peel back the money supply and raise rates when it needs to, and that the alternative -- deflation -- is far worse.
In its statement, the Fed did not directly address an exit strategy for its QE2 program, saying only that it is "maintaining its existing policy of reinvesting principal payments from its securities holdings and will complete purchases of $600 billion of longer-term Treasury securities by the end of the current quarter."
Stocks have risen modestly since the announcement, with the Dow Jones Industrial Average currently up about 44 points at 12639.