FOMC Continues Taper, Holds Rates, Keeps ‘Considerable Time’

The Federal Open Market Committee continued tapering and held interest rates at a zero to 0.25% range, leaving in the phrase about expecting them to remain there for a “considerable time,” it announced Wednesday after its two-day meeting.

Agency mortgage-backed securities will be tapered to $5 billion a month, while longer-term Treasury securities will be bought at a pace of $10 billion, starting in October, a decrease of $5 billion for each.

The statement released by the Fed said "a highly accommodative stance of monetary policy remains appropriate." The statement added the FOMC will assess "a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments" to determine how long to keep rates at this level. "The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored."

"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

Dallas Fed President Richard W. Fisher and  Fed President Charles I. Plosser dissented on the opinion.

Fisher said he believes "an earlier reduction in monetary accommodation than is suggested by the Committee's stated forward guidance" will be warranted.

Plosser objected to the time-dependent language, since it "does not reflect the considerable economic progress that has been made toward the Committee's goals."

The panel saw "moderate" expansion, with labor markets "somewhat" better, yet "the unemployment rate is little changed and a range of labor market indicators suggests that there remains significant underutilization of labor resources."

The FOMC said risks are "nearly balanced" and there is less chance inflation will remain under 2% "persistently."