United States Monetary Policy

United States

No changes in the Fed's policy stance

At its latest meeting held on 14 December, the Federal Open Market Committee (FOMC) decided to maintain its current policy stance. According to the statement, the Fed will ?continue its holdings of securities as announced in November?. The Committee reaffirmed its pledge to purchase USD 600 billion of longer-term Treasury bonds until the first half of 2011 and indicated it will ?regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability?. The FOMC also decided to keep the federal funds rate at the historically low range of 0% to 0.25% set in December 2008, in a decision expected by the market. In the statement, the Committee members confirmed that the recovery remains entrenched, albeit at an insufficient pace to reduce unemployment, which is constraining household spending. In addition, inflation remains low relative to levels that the FOMC judges to be consistent with its long-run dual mandate, stating that the federal funds rate will remain at ?exceptionally low levels for an extended period?. For the eighth consecutive meeting, Federal Reserve Bank of Kansas City President Thomas Hoenig dissented, arguing that the continued high level of monetary accommodation could lead to future imbalances that would undermine growth in the long term. Consensus Forecast participants expect the federal funds rate to remain at the historic low range of 0% to 0.25% by the end of 2010. For next year, the majority of panellists revised their forecasts and anticipate no rate hikes until December 2011, resulting in an average rate of 0.24%.

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