WASHINGTON — The Federal Open Market Committee kept the federal funds target rate unchanged Tuesday in a range between zero and 25 basis points. The committee reiterated that economic conditions warrant “exceptionally low” interest rates “for an extended period.”
The Fed made no announcement on rates paid on excess reserves or renewed Treasury purchases. However, the committee said it “will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery.”
The Fed also recommitted to its policy of reinvesting principal payments from its securities holdings. For the sixth straight meeting, Federal Reserve Bank of Kansas City president Thomas Hoenig was the lone dissenter.
The Fed has a dual mandate to promote both price stability and full employment.
“Few issues appear to have been resolved at this meeting, although Fed chairman Ben Bernanke succeeded in including an explicit reference that the Fed is out of its mandate if the current inflation rate remains too low, and unemployment too high,” said Mesirow Financial’s Diane Swonk. “If employment gains remain lackluster and/or if inflation further decelerates, Ben has made it clear that he will do what he can to adhere to the law.”