The Federal Open Market Committee (FOMC), at the end of its policy setting meeting today, said to support continued progress toward maximum employment and price stability, it expects that a highly accommodative stance of monetary policy will remain appropriate for a "considerable time after the economic recovery strengthens." In particular, the committee decided today to keep the target range for the federal funds rate at 0% to 0.25% and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
While it says inflation has recently picked up to reflect higher energy prices, it's longer-term inflation expectations remain stable. It also notes that economic growth has continued to expand at a "moderate pace," although growth in employment has been slow.
Link to full FOMC statement.
The FOMC said it will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. "The committee also will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it 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," it says. "These actions, which together will increase the committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."
Juli says: The U.S. stock market remained slightly higher in reaction to the announcement, which provided no surprises to investors.