Fed leaves low interest-rate policies unchanged

The Federal Reserve wants to make sure big banks can survived another severe economic downturn, like the 2008 financial crisis. The Fed is proposing that big banks keep enough cash, government bonds and other high-quality assets on hand at all times. The new rules would be phased in starting in 2015.

WASHINGTON The Federal Reserve says the U.S. economy still needs support from the central bank's low interest-rate policies because it is growing only moderately.

The Fed says in a statement after a two-day policy meeting that it will keep buying $85 billion a month in bonds to keep long-term interest rates low and encourage more borrowing and spending.

Stocks were down slightly after hitting record highs on Tuesday. Most investors expected the Fed to announce today that it would maintain the pace of bond purchases.

The Fed again noted that budget policies in Washington have restrained growth, but it made no mention of the 16-day government shutdown. However, the Fed no longer expressed concerns about higher mortgage rates, a concern it flagged in September.

"Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months," the Federal Open Market Committee, the central bank's monetary policy-setting panel, said in a statement. "Fiscal policy is restraining economic growth."

The only notable change from the FOMC's policy statement in September is the panel's conclusion that the housing market has "slowed somewhat" in recent month, said Paul Ashworth, chief U.S. economist with Capital Economics, in a note to clients. 

The Fed also says it plans to hold its key short-term rate at a record low near zero at least as long as the unemployment rate stays above 6.5 percent and the inflation outlook remains mild.

What the Fed didn't do, experts said, is signal when it plans to start scaling back on stimulus by "tapering" its bond purchases. But the central bank's tone somewhat was less negative than some market watchers had expected given the tepid job market and fiscal uncertainty in Washington.

"For now, officials are on hold pending more information," said Jim O'Sullivan, chief U.S. economist with High Frequency Economics. "However, if anything, the tone was probably more positive on the outlook than most people expected. There was no mention of recent fiscal turmoil and the direct reference to the 'tightening of financial conditions' was dropped."