Fed Leaves Rate Unchanged, Pledges To Use All Tools To Help Economy

WASHINGTON (AP) — The Federal Reserve, acknowledging the economy has continued to deteriorate, signaled Wednesday that it will keep using unconventional tools to cushion the fallout, including keeping a key interest rate at a record low for quite "some time."

Specifically, the Fed said it is "prepared" to buy longer-term Treasury securities if the circumstances warrant such action. At its December meeting, the Fed said it was merely evaluating that option.

The Fed agreed — with one dissent — to keep the targeted range for the federal funds rate between zero and 0.25 percent. The funds rate is the interest banks charge each other on overnight loans. Economists predict the Fed will leave rates at that range through the rest of this year.

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, was the sole dissenter. He wanted the Fed to move forward on buying Treasury securities.

"The economy has weakened further," the Fed said. To provide support, it said it would keep rates at rock bottom levels for "some time."

Having taken the unprecedented step of slashing its key rate to record lows at its previous meeting in December, the central bank pledged anew to look to other unconventional ways to revive the economy.

Fed Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in housing, credit and financial markets that — taken together — haven't been seen since the 1930s.

Despite the Fed's aggressive rate-cutting campaign, a string of bold Fed programs and a $700 billion financial bailout program run by the Treasury Department, credit and financial markets are still stressed and far from normal.