NEW YORK – The federal funds target range was left between zero and 0.25% and the Federal Open Market Committee reiterated rate “are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” according to its policy statement released this afternoon.
The panel said the economy “continued to strengthen and that the labor market is stabilizing.” Personal spending is increasing moderately, still “constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.”
The statement continued, “Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.”
Inflation, the FOMC said, should remain subdued as substantial resource slack restrains cost pressures.
Once again Federal Reserve Bank of Kansas City President Thomas M. Hoenig dissented. He believes “that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability,” the FOMC statement said.
