Some in the mainstream media tripped over themselves early Tuesday to predict the Federal Reserve would emerge from its latest policy meeting with dampened talk of an extended period of low rates and Treasury purchases as the U.S. economy appears to be back on track for somewhat improved growth levels. While the improving economy was noted, the Fed did not take anything that resembled a step back from its rates or Treasury policies.

The Fed’s Federal Open Market Committee unsurprisingly opted to hold the federal funds rate at a range between 0% and 1/4% and reiterated that conditions “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.” The announcement indicated the Fed expects moderate growth through 2012 despite problems in global markets, notably high-debt “PIIGS nations” and those in the European Union affected by their struggles. The Fed admitted such global strains remain the largest threat to an improved 2012. Meanwhile, once again, it downplayed the threat of inflation on the U.S. economy:

“The committee anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate [to foster maximum employment and price stability].”

Part of fighting off inflation as well as continuing a “stronger economic recovery,” than found over the last couple of years,  the committee intimated, is part of the reasoning between continuing its policy of reinvesting principal payments from its Treasury holdings (debt and mortgage-backed securities) back into more securities holdings.

Brian Shappell, NACM staff writer