In March, Fed officials announced that they would buy up to $1.25 trillion worth of mortgage-backed securities and bonds issued by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance companies. The Fed also surprised investors by announcing that it would buy up to $300 billion in longer-term Treasury securities.  Both of those efforts, which the Fed finances by printing more money, were intended to push down long-term interest rates, especially for home mortgages but also for other kinds of borrowing. In buying Treasury bonds and mortgage-backed securities, the Fed activity pushes up bond prices and pushes down the yield, or interest rate, that investors have to accept.  In recent weeks, the pressure on the Fed has eased slightly. Fed officials have reported some signs that the housing market might finally be close to hitting bottom. Though housing prices are still declining, the latest data suggest that the decline has slowed. Homeowners, meanwhile, are racing to take advantage of lower borrowing rates to refinance their existing mortgages.  On Wednesday, hours before the Fed announced its decision, the Commerce Department reported that the economy contracted at an annual rate of 6.1 percent in the first three months of this year — the second huge quarterly decline in a row.  But many economists said the decline, while steeper than expected, contained glimmers of good news. Consumer spending was stronger than expected, and much of the decline stemmed from a sharp drop in company inventories. A drop in inventories signals that demand for goods is outpacing production, and it often leads to an increase in production as manufacturers try to catch up.  Fed officials have made it clear they have no intention on backing down yet on their efforts to spur demand with easy money. At best, Fed officials are hoping that the economy stops contracting later this year and begins what they expect will be a weak revival.  Even if that happens, Fed officials are expecting unemployment to rise through the end of this year, and to climb above 9 percent before its starts to decline. With inflation all but nonexistent, Fed officials have concluded that they can keep their policies in place for some time before having to worry about rising consumer prices.
The Federal Reserve said it saw tentative signs of stabilization but vowed to keep pumping out money at full speed for the foreseeable future.