The Federal Reserve on Wednesday left its benchmark interest
rate, the fed funds target rate, unchanged at 0.00%-0.25% and
trimmed $10 billion from its $65 billion monthly asset-purchasing
program in place to spur recovery.
The Fed is now purchasing $55 billion in Treasury holdings and
mortgage debt a month to help make broader financial conditions
more accommodative to strengthen recovery.
The Fed's statement omitted previous language calling for
considerations for hike rates if the unemployment rate approaches a
6.5% threshold, a policy tool known as forward guidance.
Even though the economy is improving, a highly accommodative
monetary policy stance remains appropriate, the U.S. central bank
Fed officials said labor-market indicators were mixed but
improving, though the unemployment rate remains elevated.
Still, recovery remains healthy enough to throttle back on
stimulus tool such as monthly asset purchases but weak enough to do
away from rate-hike thresholds.
"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," the Fed said in a statement at the end of its March policy
meeting, the first under Chair Janet Yellen.
"With the unemployment rate nearing 6-1/2 percent, the Committee
has updated its forward guidance. The change in the Committee's
guidance does not indicate any change in the Committee's policy
intentions as set forth in its recent statements."
The U.S. unemployment rate hit 6.7% in February.
Overall, the economy continues to improve and warrants less Fed
stimulus, though inflation rates are still running below the U.S.
central bank's 2% target.
"Household spending and business fixed investment continued to
advance, while the recovery in the housing sector remained slow,"
the statement read.
"Fiscal policy is restraining economic growth, although the
extent of restraint is diminishing. Inflation has been running
below the Committee's longer-run objective, but longer-term
inflation expectations have remained stable."
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