The Federal Open Market Committee said the zero lower bound percent target range for the federal funds rate “remains appropriate” and the panel “judges that it can be patient in beginning to normalize the stance of monetary policy,” removing the phrase “for a considerable time” from its statement.
The Federal Open Market Committee said the zero lower bound percent target range for the federal funds rate "remains appropriate" and the panel "judges that it can be patient in beginning to normalize the stance of monetary policy," removing the phrase "for a considerable time" from its statement.
"In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation," according to the statement. "This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments."
The statement said the FOMC sees continued moderate expansion, better labor markets with a diminished underutilization of labor resources.
Consumer spending rose "moderately" while "business fixed investment is advancing.
The statement said the housing recovery "remains slow." Inflation, with energy prices falling, stays too low for the FOMC's long-term objectives.
The Fed will continue to reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. "This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions," the statement said.
The statement said when accommodation is removed, it will be by "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."
Dissenting were Dallas Fed President "Richard W. Fisher, who believed that, while the Committee should be patient in beginning to normalize monetary policy, improvement in the U.S. economic performance since October has moved forward, further than the majority of the Committee envisions, the date when it will likely be appropriate to increase the federal funds rate; [Minneapolis Fed President] Narayana Kocherlakota, who believed that the Committee's decision, in the context of ongoing low inflation and falling market-based measures of longer-term inflation expectations, created undue downside risk to the credibility of the 2 percent inflation target; and [Philadelphia Fed President] Charles I. Plosser, who believed that the statement should not stress the importance of the passage of time as a key element of its forward guidance and, given the improvement in economic conditions, should not emphasize the consistency of the current forward guidance with previous statements."
