The Fed is confident recession is ending

WASHINGTON (AP) — The Federal Reserve delivered a vote of confidence in the economy Wednesday, saying it would slow the pace of an emergency rescue program as the recession appears to be ending.

The central bank also held a key banking lending rate at a record low near zero and again pledged to keep it there for “an extended period” to nurture an anticipated recovery.

Fed Chairman Ben Bernanke and his colleagues said barometers suggest that “economic activity is leveling out.” That marked an upgrade from their last meeting in June when Fed policymakers merely observed that the recession was easing because the pace of the economy’s contraction was slowing. The Fed also noted Wednesday that conditions in financial markets “have improved further.”

The Fed said it would gradually slow the pace of its program to buy $300 billion worth of Treasury securities so that it will shut down at the end of October, a month later than previously scheduled. It has bought $253 billion of the securities so far.

The program is aimed at lowering rates on mortgages and other consumer debt, a move to spur Americans to spend more. But its effectiveness has been questioned by some on Wall Street and on Capitol Hill who worry that the program makes it look like the Fed is printing money to pay for Uncle Sam’s exploding deficits.

The minutes from the Fed’s June meeting showed officials “saw little point in extending it because a small increase in purchases would probably have little impact on yields, while a big increase might be misinterpreted as a willingness to monetize the budget deficit,” according to Capital Economics senior U.S. economist Paul Ashworth.

A fairly weak auction of $23 billion in 10-year Treasury notes sent a clear signal that investors were waiting to see what the Fed had to say before making any big moves. The yield on the benchmark 10-year note, which moves opposite its price, edged up to 3.71 percent from 3.70 percent ahead of the auction results and 3.67 percent late Tuesday.

The Fed didn’t make any changes to another program that aims to push down mortgage rates.

In that venture, the Fed is on track to buy $1.25 trillion worth of securities issued by mortgage finance companies Fannie Mae and Freddie Mac by the end of the year. The central bank’s recent purchases have totaled about $542.8 billion.