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Fed leaves interest rate at record low; sees signs recession easing but warns economy will remain weak; S&P hits 3-month high

Staff Report • Apr 29, 2009 at 12:00 AM

WASHINGTON (AP) -- The Federal Reserve on Wednesday said it sees signs the recession may be easing, but warned that the economy is likely to remain weak.

Against that backdrop, Fed Chairman Ben Bernanke and his colleagues left a key interest rate at a record low of between zero and 0.25 percent, and decided against taking any new steps to shore up the economy.

Aggressive action already taken - including a $1.2 trillion effort last month - should gradually help bolster economic activity, the Fed said. It did, however, leave the door open to future action if needed.

Fed policymakers offered a less dour assessment of the economy than the one provided at its previous meeting in mid-March.

"The economy has continued to contract, though the pace of contraction appears to be somewhat slower," the Fed said. The worst of the recession - in terms of lost economic activity - could be past.

Meanwhile, Stocks are holding on to big gains as the Federal Reserve says it sees the recession easing.

The central bank left interest rates at a record low level Wednesday after a two-day meeting.

The Fed says the economy will remain weak but that the "pace of contraction appears to be somewhat slower."

Stocks have been higher as investors look to bright spots in a report on weaker-than-expected economic output for the first three months of the year.

The Dow Jones industrial average is up 175 at the 8,193 level. It had been up 182 ahead of the announcement.

The Standard & Poor's 500 index is up 20 at 875, a three-month high. The Nasdaq composite index is up 41 at 1,715.

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