FOMC: Downside Risk Up, Rates Low to Mid-2013

The Federal Open Market Committee decided to leave its target rate unchanged at 0.0%-0.25% but said that “downside risks to the economic outlook have increased” and economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”

It was a divided FOMC making the decision. Federal Reserve Bank of Dallas president Richard Fisher, Minneapolis Fed president Naryana Kocherlakota, and Philadelphia Fed president Charles Plosser didn’t want the dated commitment, preferring the previous “extended period” language.

In its statement, FOMC said that “economic growth so far this year has been considerably slower than the committee had anticipated.” It also expects a “somewhat slower pace of recovery over coming quarters” than it did at the last meeting.

In the wake of market turmoil, the Fed was facing demand for confidence-building measures.

Federal Reserve chairman Ben Bernanke will have another chance later this month to weigh in on the future of monetary policy at the annual Jackson Hole Kansas City Fed conference.

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