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Fed Leaves Interest Rates Unchanged, Remains Committed To Using Full Range Of Tools

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In a widely expected move, the Federal Reserve announced Wednesday that interest rates will remain at near-zero levels amid the economic hardship imposed by the coronavirus pandemic.

The Fed said it decided to maintain the target range for the federal funds rate at zero to 0.25 percent, where it has remained since an emergency rate cut on March 15.

The accompanying statement noted economic activity and employment have picked up somewhat in recent months following sharp declines but remain well below their levels at the beginning of the year.

The central bank partly attributed the recent improvement in overall financial conditions to policy measures to support the economy and the flow of credit to U.S. households and businesses.

The Fed also reiterated that it remains committed to using its full range of tools to support the U.S. economy in this challenging time.

In addition to keeping interest rates at current levels until it is confident the economy has weathered recent events, the Fed said it will also continue to increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace.

The unanimous decision to leave rates unchanged was widely expected, although some investors may be disappointed the Fed's statement did not provide specific clues about further stimulus.

"The biggest surprise was no explicit forward guidance," said FHN Financial chief economist Chris Low. "It's likely the Fed's logic was the same as we anticipated regarding QE."

"The FOMC is ready to do it, but there was no point doing it today," he added. "Interest rates are low enough without additional help from the Fed."

The Fed's statement did include a new sentence noting the path of the economy will depend significantly on the course of the virus, which Fed Chair Jerome Powell highlighted in his post-meeting press conference.

On Tuesday, the Fed announced a three-month extension of its lending facilities that were scheduled to expire on or around September 30.

The central bank said the extension through December 31 will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the COVID-19 pandemic.

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