Information received since the Federal Open Market Committee met in October suggests that economic activity has been expanding at an encouraging pace. Fiscal policy’s drag on economic growth appears to be offset by rise in private investment. Labor market conditions have shown improvement in recent months, on balance, and the unemployment rate is declining. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.
To support the ongoing economic recovery and to help ensure that inflation, currently running below its longer term objective, over time is at the rate most consistent with the dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $15 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting 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. Taken together, these actions should maintain downward pressure on longer-term interest rates, and help to make broader financial conditions more accommodative to support the ongoing economic recovery without asset price bubbles while ensuring price stability.
For continued progress toward a self-sustaining steady state growth rate in the context of maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate after the asset purchase program ends. The Committee, therefore, decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments consistent with its longer-run goals of maximum employment and inflation of 2 percent.
To ensure that the money supply is put to its most productive uses, the Committee has decided to stop paying interest on excess reserves.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Charles L. Evans; Esther L. George; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against were none.