The Federal Reserve likely will not need to expand its huge asset purchases, but should keep short-term interest rates near zero for at least several months to nurture a soft recovery, according to a top Fed official.

New York Federal Reserve Bank President William Dudley said Wednesday that the central bank should halt as planned the purchase of up to $1.25 trillion of mortgage-backed securities by March because the economy is starting to improve. "Obviously, if mortgage rates were to back up a lot and if that had a big consequence for the economy, then we very well could rethink the issue about whether we wanted to buy more mortgages," he said.

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