"This could also be taken as another sign of the Fed's accommodative stance, because excess reserves increase a bank's lending capacity," he said.

The current accommodative stance of monetary policy, coupled with still-robust underlying growth in productivity, should be sufficient to foster an improving business climate over time.

Looking further ahead, economic growth is expected to pick up somewhat as a result of improving financial conditions, strengthening consumer business confidence, and the continuation of a highly accommodative stance of monetary policy.

"Fearing the economic repurcussions, the Fed clearly has taken an accommodative stance," said Wayne D. Lyski, senior vice president and money-market analyst at the Alliance Capital Corporation.

Traders feared that the accommodative stance could be inflationary.

The FOMC stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance.

The committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity.

"To be sure, over time, the current accommodative stance of monetary policy is not likely to be consistent with maintaining price stability," Mr. Greenspan said.

In a less accommodative stance, it buys fewer bonds or actually sells some.

These developments, along with the accommodative stance of monetary policy and ongoing growth in productivity, should foster an improving economic climate over time.