United States Monetary Policy

United States

Fed remains on hold, slightly upgrades outlook

At its policy meeting on 24-25 April, 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 picked up somewhat, mainly reflecting higher prices of crude oil and gasoline". According to monetary authorities, however, this rise in fuel costs will affect inflation only temporarily, and prices will later run at or below levels consistent with the Fed's mandate. The Fed added that long-term inflation expectations have remained stable. Monetary authorities noted that although labour market conditions have improved in recent months, the unemployment rate remains elevated. Monetary authorities expect "economic growth to remain moderate over coming quarters and then pick up gradually" and "consequently anticipate that the unemployment rate will decline gradually towards levels that the Committee judges to be consistent with its dual mandate". The FOMC also upgraded its projections and now expect GDP to grow between 2.4% and 2.9% this year (previously expected: 2.2%-2.7%) and the unemployment rate to range between 7.8% and 8.0% in the final quarter of 2012 (previously expected: 8.2%-8.5%).


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Note: Federal Funds Target Rate in %. Current rate set at a range of between 0% and 0.25%.
Source: Federal Reserve.

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