United States Monetary Policy

United States

Fed remains on hold as expected

At its policy meeting on 23-24 October, 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 Fed also announced it will continue its purchases of USD 40 billion per month in mortgage-backed securities - a programme commonly known as QE3 - as announced in September. Combined with its average maturity extension programme, commonly referred to as Operation Twist, the two schemes will increase the Fed's holdings of longer-term securities by about USD 85 billion each month throughout the end of the year. All these decisions were expected by the market. In its statement, which was virtually unchanged from the previous month, the Fed reiterated that growth in employment has been slow in recent months and that the unemployment rate remains elevated, while adding that the housing sector is showing some signs of improvement, albeit from a depressed level. Regarding price developments, the Fed stated that inflation has recently picked up somewhat, reflecting higher energy prices while adding that long-term inflation expectations have remained stable. According to the Committee, inflation over the medium term will likely run at or below its 2 percent objective.


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