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Wednesday, December 16, 2009

Fed Continues Upbeat Tenor

On Wednesday, the Federal Reserve underscored that the U.S. economy is picking up steam but reassured observers that inflation is in check that that it will keep short-term interest rates near zero for an "extended period."

In their statement after the meeting, the members concluded that the US economy has continued to "pick up," that declines in the job market are "abating" and that in general financial conditions "have become more supportive of economic growth."

Source: Google Images

Some members believe inflation is likely to remain so low that rate increases might not be needed until 2011.

The Fed underscored in its statement many of the emergency measures it has taken in the past two years were being unwound. In earlier discussions the Fed has indicated that it will begin to unwind other extraordinary accommodations prior to any upward rate moves:

"In light of ongoing improvements in the functioning of financial markets, the [FOMC] and the [Fed's board of governors] anticipate that most of the Federal Reserve's special liquidity facilities will expire on February 1, 2010."

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