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Fed pledges to hold key interest rate at record low

November 04, 2009

WASHINGTON (AP) -- With the recession apparently over, the Federal Reserve on Wednesday held a key interest rate at a record low and again pledged to keep it there for an "extended period" to foster the fragile economic recovery.

The Fed said economic activity has "continued to pick up" and that the housing market also has grown stronger, a key ingredient to a sustained recovery.

But Fed Chairman Ben Bernanke and his colleagues warned that rising joblessness and hard-to-get-credit for many people and companies could restrain the rebound in the months ahead.

Against that backdrop, the Fed kept the target range for its bank lending rate at zero to 0.25 percent. That means commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay at about 3.25 percent, the lowest in decades.

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The Fed made no major changes to a program to help drive down mortgage rates and support the housing market. The central bank did say it will trim its purchases of debt from Fannie Mae and Freddie Mac to $175 billion, from $200 billion, because the supply of that debt has declined.

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