US Fed sees improving eco; leaves rates at near-zero levels

The US Federal Reserve has said economic activity is improving while deciding to continue with the near-zero interest rate regime to bolster the economy.

The apex bank's move to stick with key interest rates in the range of 0 to 0.25 per cent comes in the backdrop of the American economy showing early signs of revival, especially the labour market.

In a statement on Wednesday, the Federal Open Market Committee -- the body which decides on the country's monetary policy -- said that "economic activity has continued to pick up and that the deterioration in labour market is abating".

According to the Fed, the exceptionally low interest rates would remain for a longer time. "(The committee) continues to anticipate that economic conditions, including low rates of resource utilisation, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period," the statement noted.

With inflation at just 0.4 per cent in November, the Fed is also not under pressure to tighten easy monetary policy.

Battered by the worst financial crisis since the 1930s Great Depression, the US has resorted to many policy measures to bolster the ravaged national economy. The Fed has been continuing with very low interest rates since December 2008.

Noting that the financial market conditions have become more supportive of economic growth, the Fed said that the housing sector has shown improvement signs in recent months.

To support the mortgage lending and housing markets -- among the worst hit by the turmoil -- the Fed would continue to buy securities. The apex bank is in the process of buying $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt.

"In order to promote a smooth transition in markets, the committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010," the statement added.

After hovering at a 26-year-high of 10.2 per cent, the jobless rate came down to 10 per cent in November, indicating that employment situation is improving. Further, the American economy expanded 2.8 per cent in the third quarter.