Fed Continues to Keep Stimulus in Place
According to the minutes from the April 30-May 1 FOMC meeting, all but one member judged that a highly accommodative stance of monetary policy was warranted in order to foster a stronger economic recovery in a context of price stability.
The committee agreed to continue purchases of mortgage-backed securities at a pace of $40 billion per month and purchases of longer-term Treasury securities at a pace of $45 billion per month, as well as to maintain the committee’s reinvestment policies.
The committee also retained its forward guidance about the federal funds rate, including the thresholds on the unemployment and inflation rates. One member dissented from the committee’s policy decision, expressing concern that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in inflation expectations.
To support continued progress toward maximum employment and price stability, the committee said it expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the committee decided to keep the target range for the federal funds rate at 0% to 0.25% and currently anticipates that 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.
To read the complete FOMC minutes click here.