The USA FRS set a target range of the basic rate from 0 % to 0.25 %

/INTERFAX-AFI, Washington, December 17, 08/ - Federal Reserve System (FRS) USA on Tuesday decided to set a target range of the base interest rate from 0 % to 0.25 % APR, the document to the outcome of the meeting of the Committee for Open Market (FOMC) says. Analysts expected decline in rates to 0.5 % from 1% APR. Rate (discount rate) was lowered by 0.75 percentage point - to 0.5 % APR. "Since the last meeting of the committee, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment and industrial production declined. Financial markets remain strained, and credit conditions difficult. Overall, the forecast economic activity is weakened further", - the document says. "At the same time, inflation pressures appreciably diminished. In the light of reducing the cost of energy and other raw materials and weak forecasts of economic activity, Committee expects inflation to continue weakening in the coming quarters", - FOMC message says. "The Federal Reserve System will use all available means to facilitate the resumption of sustained economic growth and maintain price stability. In particular, the committee expects that weak economic conditions, it seems, are the basis for extremely low levels of the basic interest rate for some time", - the document says. FOMC said it would focus on "maintaining the functioning of financial markets and stimulating the economy through "open-market" operations and other measures that would allow to maintain a balance of FRS at a high level". "As previously announced, in the next several quarters the FRS would have to buy large amounts of agency debt and securities, secured by mortgages, to provide support to the mortgage market and housing" - the Committee's message informs. "The Committee also estimates the potential benefits from the acquisition of long-term Treasuries. At the beginning of next year, the Federal Reserve System will also launch the program Term Asset-Backed Securities Loan Facility to promote loans to homeowners and small businesses. The Federal Reserve System will continue to use the balance for further credit market and economic activity support" - FOMC document informs. American stock indexes accelerated the growth after FRS decision on rate decreasing to the record low level, at that banks` shares are growing. In particular, the value of Citigroup shares has grown by 7.6 % and JPMorgan Chase & Co. - by 9.2 %. On Tuesday Dow Jones Industrial Average Index at 10:32 p.m. (Moscow Time) has grown by 2.8 % - to 8802.52 points. Standard & Poor's 500 - by 3.3 % to 897.39 points. Nasdaq Composite - by 3.6 % to 1561.98 points. Before the decision on the rate, indicators rise made 1.4 - 2.3 %. Value of the USA treasury obligation is also growing. The yield of 30-years securities at 10:26 p.m. (Moscow Time) has fallen by 7 b. p. to 2.88 % APR, 2-year's notes - by 12 b. p. to 2.39 % APR. The USD rate went on falling after the decision, at that it fell to the minimum for the last two months against euro. The USD/EUR rate at 10:38 p.m. (Moscow Time) has fallen by 2 % to $1.3971, compared to $1.3688 on closing market on Monday. Dollar reduced by 1.3 % to JPY89.5 against Japanese yen, compared to JPY90.65 the day before. [2008-12-18]