For immediate release
Information received since the Federal Open Market Committee met in OctoberDecember indicates that growth in economic activity is expanding at a moderate pace.picked up in recent quarters. Labor market conditions have shownindicators were mixed but on balance showed further improvement; theimprovement. The unemployment rate has declined but remains elevated. Household spending and business fixed investment advanced,advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat in recent months.somewhat. Fiscal policy is restraining economic growth, although the extent of restraint may beis
diminishing. Inflation has been running below the Committee’s
longer-run objective, but 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 that, with
appropriate policy accommodation, economic growthactivity will pick up from its recentexpand at a moderate
pace and the unemployment rate will gradually decline toward levels the
Committee judges consistent with its dual mandate. The Committee sees
the risks to the outlook for the economy and the labor market as having
become more nearly balanced. The Committee recognizes that inflation
persistently below its 2 percent objective could pose risks to economic
performance, and it is monitoring inflation developments carefully for
evidence that inflation will move back toward its objective over the
medium term.
Taking into account the extent of federal fiscal retrenchment since the
inception of its current asset purchase program, the Committee seescontinues to see
the improvement in economic activity and labor market conditions over
that period as consistent with growing underlying strength in the
broader economy. In light of the cumulative progress toward maximum
employment and the improvement in the outlook for labor market
conditions, the Committee decided to modestly reducemake a further measured reduction in the pace of its asset purchases. Beginning in January,February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35$30 billion per month rather than $40$35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40$35 billion per month rather than $45$40
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
Committee’s sizable and still-increasing holdings of longer-term
securities 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.
The Committee will closely monitor incoming information on economic and
financial developments in coming months and will continue its purchases
of Treasury and agency mortgage-backed securities, and employ its other policy policy
tools as appropriate, until the outlook for the labor market has
improved substantially in a context of price stability. If incoming
information broadly supports the Committee’s expectation of ongoing
improvement in labor market conditions and inflation moving back toward
its longer-run objective, the Committee will likely reduce the pace of
asset purchases in further measured steps at future meetings. However,
asset purchases are not on a preset course, and the Committee’s
decisions about their pace will remain contingent on the Committee’s
outlook for the labor market and inflation as well as its assessment of
the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price
stability, the Committee today reaffirmed its view 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. The Committee also reaffirmed its expectation
that the current exceptionally low target range for the federal funds
rate of 0 to 1/4 percent will be appropriate at least as long as the
unemployment rate remains above 6-1/2 percent, inflation between one and
two years ahead is projected to be no more than a half percentage point
above the Committee’s 2 percent longer-run goal, and longer-term
inflation expectations continue to be well anchored. In determining how
long to maintain a highly accommodative stance of monetary policy, the
Committee will also consider other information, including additional
measures of labor market conditions, indicators of inflation pressures
and inflation expectations, and readings on financial developments. The
Committee now anticipates,continues to anticipate,
based on its assessment of these factors, that it likely will be
appropriate to maintain the current target range for the federal funds
rate well past the time that the unemployment rate declines below 6-1/2
percent, especially if projected inflation continues to run below the
Committee’s 2 percent longer-run goal. When the Committee decides to
begin to remove policy accommodation, it will take a balanced approach
consistent with its longer-run goals of maximum employment and inflation
of 2 percent.