Information received since the Federal Open Market Committee met in MarchApril suggests
that the economy has been expanding moderately. Labor market
conditions have improvedmoderately this year. However, growth in employment has slowedin recent months;months, and the
unemployment rate has declined but remains elevated. Household spending and businessBusiness fixed investment havehas continued
to advance. Household
spending appears to be rising at a somewhat slower pace than earlier in the
year. Despite some
signs of improvement, the housing sector remains depressed. Inflation haspicked up somewhat,declined, mainly reflecting higherlower prices
of crude oil and gasoline. However,gasoline, and longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the
Committee seeks to foster maximum employment and price stability. 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 graduallyonly slowly toward
levels that it judges to be consistent with its dual mandate. StrainsFurthermore, strains in global financial markets continue to pose significant
downside risks to the economic outlook. The increase in
oil and gasoline prices earlier this year is expected to affect inflation only
temporarily, and the Committee
anticipates that subsequently inflation over the
medium term will run
at or below the rate that it judges most consistent with its dual mandate.
To support a stronger economic recovery and to
help ensure that inflation, over time, is at the rate most consistent with its
dual mandate, the Committee expects to maintain a highly accommodative stance
for monetary policy. In particular, the Committee decided today to keep the
target range for the federal funds rate at 0 to 1/4 percent and currently
anticipates that economic conditions-including low rates of resource utilization
and a subdued outlook for inflation over the medium run-are likely to warrant
exceptionally low levels for the federal funds rate at least through late 2014.
The Committee also decided to continue through the end of the year its program to extend the average maturity of its
holdings ofsecurities. Specifically, the Committee intends to purchase Treasury securities as announced in September.with remaining maturities of 6
years to 30 years at the current pace and to sell or redeem an equal amount of
Treasury securities with remaining maturities of approximately 3 years or less.
This continuation of the maturity extension program should put downward
pressure on longer-term interest rates and help to make broader financial
conditions more accommodative. The
Committee is maintaining its existing policiespolicy 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.securities.The Committee will
regularly review the size and composition of its securities holdings and is prepared to adjust those holdingstake further action as appropriate to promote a stronger economic recovery and
sustained improvement in labor market conditions in a context of price stability.