By JEANNINE AVERSA, AP: Wrapping up a two-day meeting, the Fed in a 9-1 decision retained its pledge to hold rates at historic lows for an "extended period." Doing so will help energize the recovery.
The Fed offered a more upbeat view of the economy even as it noted that risks remain. It said the job market is "beginning to improve," an upgrade from its last meeting in mid-March. It observed then that the unemployment situation was merely "stabilizing."
The Fed also noted that consumer spending has "picked up," an improvement from its last observation that spending was expanding at a "moderate pace."
Even with the improvements, the Fed said there was reason to be cautious.
High unemployment, sluggish income gains and tight credit is still dampening consumer spending, a major contributor to economic activity. Commercial real estate remains fragile. And though housing activity has edged up, it is still at depressed levels. Bank lending continues to shrink.
Investors showed little reaction to the Fed's statement. The Dow Jones industrial average was relatively unchanged after the announcement.
Prices for Treasurys continued to slip following the announcement. The yield on the 10-year note, which moves inversely to its price, edged up to 3.77 percent, from 3.75 percent just before the announcement.
READ the entire statement from the Federal Reserve:
Federal Reserve Press Release
Release Date: April 28, 2010
For immediate release
Information received since the Federal Open Market Committee met in March suggests that economic activity has continued to strengthen and that the labor market is beginning to improve. Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities; it closed on March 31 for loans backed by all other types of collateral.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer run macroeconomic and financial stability, while limiting the Committee's flexibility to begin raising rates modestly.