The Federal Reserve on Wednesday left a key interest rate near zero and said it will continue to use all available tools to improve liquidity in credit markets and increase lending.

Because the economy has continued to contract since the Fed’s last meeting in March, the central bank said it will continue to purchase mortgage backed securities and keep interest rates at historically low levels.

You can order swine flu masks here >>>> ActiveForever

3M ™ Health Care N95 Particulate Respirator and Surgical Mask

The central bank’s Federal Open Markets Committee set the Federal Funds rate in the 0% to 0.25% range in December and it has remained unchanged since.

The Federal Funds rate is the rate that banks charge each and is a broad indicator of general interest rate trends.

Prepare For The Swine Flu – See Banner Below

The Federal Reserve also announced that it will continue its repurchase plan. The Fed plans to buy $300 billion of long-term Treasury securities in an effort to decrease consumer lending costs by pumping money into credit markets.

The Treasury repurchase program came after the Fed’s two-day meeting in mid-March when it announced a plan to buy over a trillion dollars of U.S. agency mortgage backed securities, and up to $200 billion of agency debt by the end of the year.

Despite these efforts, banks have remained reluctant to lend – partly due to concerns about repayment and maintaining a strong balance sheet in a struggling economy. But the purchase drove rates down for several consumer debt instruments, notably mortgages, and led to an increase in refinance applications.

The FOMC statement was released Wednesday just hours after the government said gross domestic product fell 6.1% during the first quarter, greater than the 4.7% contraction analysts predicted.

Some analysts were worried that keeping the rates too low for too long would create inflation, but the worse-than-expected GDP seems to have put inflation on the backburner.

“Because of this morning’s GDP report and because it was much worse than expected, one of the things it will do is shield the Fed from having to reveal their plan of unwinding monetary stimulus. Had the GDP report been to the upside the market would have been forced to release their exit strategy,” said Lindsey Piegza, economic analyst at FTN Financial.

The FOMC said inflation will “remain subdued” in light of “increasing economic slack.”