The Federal Open Market Committee once again kept the benchmark interest rate at next to nothing, and officials said current economic conditions “are likely to warrant exceptionally low levels for the federal funds rate for an extended period.” The Federal Reserve lowered the rate to 0% to 0.25% in December 2008 in a move that was supposed to spur increased lending by banks. But people aren’t taking out mortgages nor making big purchases with credit cards, despite historically low rates. “Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit,” the FOMC said Tuesday. Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association, said earlier this week that he expects the Fed to maintain the ZIRP for at least the next year, if not longer. At the MBA’s mortgage operations conference, Fratantoni said Monday high levels of unemployment and “tremendous loss in home values” have kept people from spending. And he expects another year of somewhat depressing economic outlooks. He said Americans lost about $14 trillion in home value from peak levels in 2006 to trough levels in early 2009. The FOMC has directed its trading desk at the New York Fed to maintain the total face value of domestic securities held in the system open market account at about $2 trillion. This is achieved through reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities, which is known as quantitative easing. On Monday, the Fed bought another nearly $5.2 billion of Treasury debt and dealers can’t get enough, as the deal was nearly five-times over-subscribed. Officials said Tuesday the FOMC will continue reinvesting debt proceeds into Treasuries but stopped short of announcing plans to increase or decrease the scope of the plan. “The committee 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,” according to the Fed announcement Tuesday. Most of the FOMC stands in agreement regarding the reinvestment policy with Kansas City Fed chief Thomas Hoenig the only dissenter. Hoenig once again voted against the Fed’s policy decision Tuesday, just as he’s done all year. He doesn’t feel the reinvestments help support the committee’s policy objectives of maximum employment and price stability. In today’s announcement, the FOMC said “measures of underlying inflation are currently at levels somewhat below those the committee judges most consistent, over the longer run” with the policy mandates. Hoening believes “continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period [is] no longer warranted and will lead to future imbalances that undermine stable long-run growth.” Treasuries have been rising this week ahead of the FOMC announcement, dropping yields to record lows on two-year notes of less than 0.45%. Yields on 10-year notes were down to 2.68% in early trading Tuesday, according to Bloomberg data. While home sales have plummeted recently, due in part to the expiration of the homebuyer tax credit, construction activity picked up last month. Still the housing market is scrapping bottom. “With excess inventory, deficient demand, further foreclosures and a depressing job market, expectations over the next few months remain low,” for the industry, according to Mitchell Hochberg of Madden Real Estate Ventures. The National Association of Home Builders said its homebuilder confidence index, which is complied in conjunction with Wells Fargo (WFC),  remained unchanged in September with the 17-month low of 13 reported in August. Any reading below 50 on the scale of 100 indicates pessimism in housing market conditions. Write to Jason Philyaw.