United States Monetary Policy

United States

Fed remains on hold

At its policy meeting on 13 March, the Federal Open Market Committee (FOMC) left the federal funds rate within the historically-low range of 0% to 0.25% established in December 2008. The Committee also left unchanged its average maturity extension programme, commonly referred to as Operation Twist, and announced it would continue reinvesting the proceeds from its maturing debt. All these decisions were expected by the market. The Fed stated that ?inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately?. According to monetary authorities, although this rise in fuel costs will push up inflation temporarily, prices will later return to levels consistent with the Fed's mandate, while adding that long-term inflation expectations have remained stable. The Fed also noted that although the labour market has improved notably in recent months, the unemployment rate remains elevated. Monetary authorities expect ?moderate economic growth over coming quarters and consequently anticipate that the unemployment rate will decline gradually towards levels that the Committee judges to be consistent with its dual mandate?. The Committee reiterated that it now expects the federal funds rate to remain at exceptionally low levels until, at least, late 2014.


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