Fed says ready to buy debt to aid economy

WASHINGTON - The Federal Reserve on Wednesday said it is prepared to buy long-term government debt if that would help improve credit conditions and signalled some concern that deflation risks were rising.

In a statement issued at the end of a two-day meeting, the central bank's policy-setting panel also said it was holding its target range for overnight interest rates at zero to 0.25 per cent - the level reached in December - and repeated that it thought rates could stay unusually low for some time.

'The committee ... is prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,' it said. In December, the Fed had said only that it was studying that option.

The panel voted 8-1 in support of the decision. Richmond Federal Reserve Bank President Jeffrey Lacker dissented, saying he thought the Fed should immediately move to a programme to purchase government bonds.

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