Fed takes action as US economic growth slows

THE US central bank will maintain its holdings of securities to stop money from being drained out of the financial system, in their first attempt to bolster the economy in more than a year.

The Federal Reserve said it will reinvest proceeds on its mortgage holdings into long-term US government debt. It retained a commitment to keep its benchmark interest rate close to zero for an “extended period”.

“The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Fed said in a statement yesterday. “To help support the economic recovery in a context of price stability, the committee will keep constant the Federal Reserve’s holdings of securities at their current level.”