Fed: Economic recovery slower than once thought

The Federal Reserve said Tuesday the pace of economic recovery is likely to be slower in the near-term than had previously been estimated and said it would buy U.S. debt to support the economy.

"The pace of economic recovery is likely to be more modest in the near term than had been anticipated," the Fed said in a statement.

The central bank also did not vote to change the federal funds rate, its main tool for shifting interest rate policy.

But the Fed said it would maintain its current level of holdings in securities by buying U.S. debt.

During the financial crisis, the Fed pumped more than $1 trillion into the U.S. economy by buying mortgage-backed securities. The Fed's statement on Tuesday is a recognition of continuing needs to support the economy. The central bank had begun to wind down programs designed to prop up the economy at the height of the 2008 crisis.

As some of its holdings in mortgage-backed securities mature, the central bank will reinvest the principal in other Treasury securities. The investments are meant to support the broader economy and housing market, which continues to struggle under the weight of mounting foreclosures.

After growing at an annual rate of 3.7 percent in the first quarter of this year, the economy slowed to a growth of 2.4 percent in the second quarter. The growth rate is down from the end of 2009.

The unemployment rate continues to be stuck at 9.5 percent with meager private-sector job-growth.

This story was updated at 2:51 p.m.