FOMC: Still Preaching Patience

The Federal Open Market Committee held steady at its latest meeting, still preaching patience and calling "risks to the outlook for economic activity and the labor market" nearly balanced.

The statement released by the FOMC says the economy "has been expanding at a solid pace," with improvement in labor markets, including "strong job gains" and a falling unemployment rate. Underutilization of labor resources appear to be declining.

Household spending rose moderately, with lower energy costs giving spending a boost. Business are also spending more, the Fed said.

Housing continues to recover slowly, and inflation "declined further," mainly because of dropping energy prices.

"Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable," the statement said.

"The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate," the statement said. "The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate."

The panel held the target rate for the federal funds at zero to ¼%, and said "progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation," will dictate when this changes.

"Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy," the statement noted. The statement also said that changes in incoming data could change the when the rate will increase.

The FOMC 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 action was approved by the board with no dissent.

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