Fed Keeps Rates Steady; QE Continues

Fed Keeps Rates Steady; QE Continues

Members of the Federal Open Market Committee announced this afternoon that they will continue to keep the federal funds target rate between 0% and 0.25% for "at least as long" as unemployment stays above 6.5% (it's currently 7.6%) and inflation projections remain "well anchored" below 2.5%.

The committee believes the current rate of economic expansion in 2013 is modest, boosted by labor market improvements, increased spending and investment, and a continued housing market recovery. The announcement also noted that downside risks to the economy have tapered off since the fall.

However, it was quick to reaffirm that to fulfill its dual mandate of maximum employment and price stability, appropriate policy accommodation remained necessary. In addition to the low federal funds rate, the FOMC will continue to purchase $40 billion in agency mortgage-backed securities each month, as well as $45 billion in longer-term Treasury securities.

The committee noted: "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."

Eleven of the FOMC members voted in favor, while Esther George of the Kansas City Federal Reserve dissented. George remains concerned that the "high level of monetary accommodation" sends the wrong message to the markets, increasing the risk of future imbalances and long-term inflation expectations.

The article Fed Keeps Rates Steady; QE Continues originally appeared on Fool.com.

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