Fed Keeps Rates Near Zero, Vows More Moves

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 now "prepared" to buy longer-term Treasury securities if the circumstances warrant such action. That put a little more forward movement on this approach. 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 togheter 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.

Yet, the Fed said there's been some thawing of frozen credit conditions.

"Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight," the Fed said.

The central bank said it will be launching a program aimed at bolstering the availability of consumer loans.

Under the program, which is expected to start in February, up to $200 billion will be made available to spur auto, student and credit card loans as well as loans to small businesses. To do that, the Fed will buy securities backed by those different types of consumer debt. The Fed also hopes that action will lower rates on those loans.

The Fed said it will assess whether the program should be expanded in size or scope. Fed officials previously have mentioned the possibility of expanding the program to provide financing for other types of securities, such as those backed by commercial mortgages.