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Fed offers assurances on rates

No promises to boost Treasury purchases

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Countering fears that it will be forced to take action to counter the threat of inflation, the Federal Reserve said Wednesday it expects to keep short-term interest rates "exceptionally low" for an extended period.With the target rate for the federal funds overnight rate at zero to 0.25 percent, the Fed has run out of room for further reductions in short-term rates. But it reiterated a commitment to make $1.25 trillion in total purchases of mortgage-backed securities by the end of the year, continuing a program that many observers credit with keeping mortgage rates low.The Fed did not raise a cap of $300 billion in purchases of Treasury securities, however, a policy that could eventually lead to higher interest rates on those investments if demand for them wanes.Bond prices and yields move in opposite directions. Mortgage rates, although not tied directly to Treasurys, have risen in concert with Treasury yields in recent weeks as demand for mortgage-backed securities and Trea...