The Federal Reserve, while tipping its cap to continued problems of high unemployment and European debt woes, overall was largely positive in its statement following its monetary policy meeting of the Federal Open Market Committee Wednesday. As such, the Fed reiterated its play to stay the course.
The FOMC said the economy continues to expand at a moderate pace, and it expects that to continue, even with elevated unemployment:
“The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate."
The Fed voted to keep the target for the federal funds rate at a range between 0% and 1/4%. It reiterated plans to keep rates at historicaly low levels "at least through late 2014."
Additionally, in pledging the ability to take further action should positive growth trends reverse, the Fed plans to continue its other efforts to put downward pressure on longer-term interest rates and foster “more accommodative” financial conditions:
“Specifically, the Committee intends to purchase Treasury securities with remaining maturities of six years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately three years or less…The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.”
- Brian Shappell, CBA, NACM staff writer