WASHINGTON — The Federal Reserve on Tuesday repeated its pledge to hold interest rates at record lows to foster the economic recovery and ease high unemployment.
But the Fed's assessment of the economy was a bit more upbeat.
It said the job market is stabilizing. That was an improvement from its January statement, when it said the deterioration in the labor market was abating.
It also said business spending on equipment and software has risen significantly, also an upgrade from its last assessment.
Still, the Fed cautioned that spending by consumers could be dampened by high unemployment, sluggish income growth, lower wealth and tight credit.
"The Fed painted the economy in a slightly brighter shade," said Stuart Hoffman, chief economist at PNC Financial Services Group. "It's been painted black for so long. Now, it is a lighter shade of gray."
The Fed held its target range for its bank lending rate at zero to 0.25 percent, where it's been since December 2008. In response, commercial banks' prime lending rate, used to peg rates on certain credit cards and consumer loans, has remained about 3.25 percent, its lowest in decades.
The Fed made no changes to a program to drive down mortgage rates and bolster the housing market, even as a government report Tuesday showed housing construction tumbling in February.
Under that program, the Fed is scheduled to end its mortgage securities purchases from Fannie Mae and Freddie Mac at the end of this month. Some analysts fear that once the program ends, mortgage rates could rise. That could weaken the recovery in housing and the overall economy. The Fed has left the door open to extending the program if the economy weakens.
Hoffman thinks 30-year fixed mortgage rates, hovering around 5 percent, could rise to about 5.25 percent to 5.5 percent after the Fed program ends. That increase also would reflect stronger demand for mortgages as people rush to take advantage of a home buyer tax credit that expires at the end of April.
The average rate on 30-year, fixed-rate mortgages dipped to 4.95 percent last week from 4.97 percent a week earlier according to mortgage finance company Freddie Mac.