WASHINGTON, DC-Worried that the economic recovery has stalled, the Federal Reserve Bank will be stepping up its investment in government debt. The decision was made during a one-day meeting, held on Tuesday, in which Fed officials came to the conclusion that the recovery is weaker than it had anticipated during its last meeting in June. It will use the interest it is earning from expiring mortgage-backed securities to buy Treasuries that are maturing in the next two to 10 years.

Last year and in the beginning of 2010, the Federal Reserve brought considerable firepower to the market, buying $1.25 trillion in mortgage securities, $175 billion in mortgage debt from the GSEs and $300 billion in government debt.

Treasury prices, not surprisingly, rallied after the Federal Reserve made its announcement--particularly those with five-to-seven-year maturity dates. The tactic is also expected to put some downward pressure on mortgage and corporate debt rates.

Also, interest rates dropped slightly after the Fed’s announcement, and it looks like a safe bet that interest rates will remain low for some time," says Dennis Sughrue, commercial real estate partner at New York City law firm Herrick, Feinstein. For his commercial real estate clients--companies looking to buy commercial property here and in Latin America--Sughrue says the news is "a mild positive. But it’s important to look at the bigger picture and realize that commercial real estate borrowers haven’t been stymied recently by high interest rates," he tells GlobeSt.com. "It has been the relatively unavailability of financing at nearly any price that has slowed development activity and the sales-investment market.”

On a list of 10 issues facing borrowers, he says that “interest rates might be number 10 or even number 11. So while the Fed’s announcement was a welcome one, it’s hardly a panacea or some big-picture action that will, by itself, spur a large increase in sales-investment and development activity."

Of course, a borrower whose loan is based on Libor might not agree, says Kieran Quinn, vice chairman of Walker & Dunlop. "We, as an industry, are living on oxygen support and Band-Aids right now, and the biggest Band-Aid is the low interest rates," he tells GlobeSt.com. A borrower with a loan based on Libor "is praying every day that the interest rate doesn’t move."