United States: Fed reaffirms highly accommodative stance
January 30, 2013
At its policy meeting on 29-30 January, the Federal Open Market Committee (FOMC) reaffirmed its monetary policy stance. The FOMC stated that the target range for the federal funds rates will remain at between 0.00% and 0.25% at least as long as the unemployment rate remains above 6.5% and while long-term inflation expectations remain well anchored. Moreover, the Fed announced it will continue with its additional monthly purchases of USD 45 billion of long-term Treasury securities and USD 40 billion of mortgage-backed securities, in addition to reinvesting the principal payments from its holdings. The decisions were in line with market expectations.
In its statement, the Fed stated that data for December showed that economic growth stalled in recent months, reflecting the impact of Hurricane Sandy and "other transitory factors". Moreover, while the Committee noted positive developments in global financial markets, it "continues to see downside risks to the economic outlook" and "anticipates that inflation over the medium term likely will run at or below its 2 percent objective".
The FOMC expects a "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens".