WASHINGTON — The Federal Reserve will reduce its monthly asset purchases by $10 billion beginning in May "until the outlook for the labor market has improved substantially in a context of price stability," the Federal Open Market Committee said in a statement released Wednesday following the committee's two-day meeting.
The Fed said it is making "a further measured reduction" in the pace of its asset purchases and will buy longer-term Treasuries at a rate of $25 billion instead of $30 billion per month and mortgage-backed securities at a rate of $20 billion rather than $25 billion per month, the statement said.
The sizable and still-increasing holdings of longer-term securities "should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," the FOMC said in its statement.
"The committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability," the statement said.
FOMC added that "asset purchases are not on a preset course, and the committee's decisions about their pace will remain contingent on the committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases."
The FOMC also decided to keep the target range for the federal funds rate at zero to 0.25%. 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% inflation. This assessment will take into account a wide range of information," the statement said.
The committee believes 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% longer-run goal, and provided that longer-term inflation expectations remain well anchored," the statement said.
"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%," the statement said. "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."
No members voted against the monetary policy action.
