Noting that the recovery has slowed, the Federal Reserve on Tuesday signaled that it is prepared to take new steps to shore up the economy if needed. The central bank said conditions are likely to warrant keeping short-term interest rates at record lows "for an extended period."
The Fed said it will continue to "monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."
At the end of its meeting Tuesday, the last before the Nov. 2 elections, the Fed held off on taking any bold new steps to rejuvenate the economy and drive down near double-digit unemployment. Instead, the Fed is taking a wait-and-see approach to see if the economy can heal on its own.
The meeting comes as voters are focused on the economy and the jobs crisis.
The Fed offered a dim view of the economy.
"Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit," the Fed said in its statement. "Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months."
The Fed said it expects activity to pick up gradually, "although the pace of economic recovery is likely to be modest in the near term."
Inflation remains low and "is likely to remain subdued for some time," the policymakers said.
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