Fed: Economy's Getting Worse

Updated from 2:46 p.m. EST

The Federal Reserve refrained from changing its target interest rate Wednesday, saying it will instead continue looking to its list of emergency programs to prop up the U.S. economy.

The Federal Open Market Committee, the policymaking arm of the central bank, elected to leave the fed funds target rate unchanged in the range of zero to 0.25% that was established at the FOMC's last meeting in December.

For Fed watchers, the decision came as no surprise. As it said following the conclusion of its Dec. 16 meeting, the FOMC said it anticipated that weak economic conditions would probably warrant "exceptionally low levels" of the fed funds rate for some time.

One of the more unfortunate observations this time was the statement that recent data "suggests that the economy has weakened further. Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly."

While the central bank said that some market areas have improved, credit conditions for individuals and businesses remain "extremely tight." The FOMC believes a recovery in economic activity could start later this year, "but the downside risks to that outlook are significant."

Rising inflation isn't likely to be a problem for the coming quarters, the FOMC said.

The establishment of a range last month was a departure from the Fed's standard procedure. Since 1995, the Fed has explicitly stated a target level for the fed funds rate. Before the previous meeting, the Fed's target had never dipped below 1%.