Daily News: September 19, 2013

Fed Maintains Stimulus; Awaits Evidence of Sustained Recovery


The Fed said that although it sees improvement in economic activity and labor market conditions, it will await more evidence that this progress is sustainable before adjusting the pace of its bond purchases.

The Federal Reserve announced that although it sees improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy, it has decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.

The committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. 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 and of rolling over maturing Treasury securities at auction.

The Fed said that taken together, these actions 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 and help to ensure that inflation, over time, is at the rate most consistent with the committee’s dual mandate.

In addition, 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 Fed’s full news release click here.