United States Monetary Policy

United States

Fed bound to maintain current rates at least through mid-2013

At its latest policy meeting on 9 August, the Federal Open Market Committee (FOMC) left the federal funds rate unchanged within the historically-low range of 0% to 0.25% set in December 2008. The FOMC also refrained from any further expansion of its asset purchase programme, commonly referred to now as QE3. The decision came in after stock markets around the world plummeted following Standard and Poor's decision on 5 August to cut the United States' credit rating a notch from AAA to AA+, which nevertheless represents the second best grade available. The FOMC, however, did alter its policy stance, stating that current conditions warrant exceptionally low levels for the federal funds rate at least through mid-2013. The move surprised the market, as most analysts expected the Fed to raise interest rates next year. Previously, the FOMC stated that interest rates would remain low for "an extended period?. In addition, the Fed confirmed that proceeds from maturing debt under its asset purchase programme will continue to be reinvested.


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