The Federal Reserve emerged from its economic policy meeting Wednesday with little news of change on interest rates or its current securities purchases policy. That said, it did attempt to offer some clarity on what could cause a change of policy direction.
The Fed’s Federal Open Market Committee left rates untouched at a range between 0% and 0.25%. The FOMC also gave some guidelines for when that would change, and it’s unlikely in the next year. In fact, the FOMC noted highly accommodative monetary policy will stay in place “for a considerable time after the asset purchase program ends and the economic recovery strengthens.”
“This exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2% longer-run goal and longer-term inflation expectations continue to be well anchored,” the Fed said in a statement.
Meanwhile, the committee decided to continue purchasing agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at $45 billion. The FOMC believes these actions and continuing to reinvest principal payments from current debt holdings “should maintain downward pressure on longer-term interest rates, support mortgage markets and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery.”
- Brian Shappell, CBA, CICP, NACM staff writer