Although the Federal Reserve Open Market Statement of March 16 had a bit lighter tone than many in the recent past, saying “economic activity has continued to strengthen and that the labor market is stabilizing,” the Fed kept Fed Funds rates “exceptionally low,” at 0% to 0.25% and expects to continue to do so for “an extended period.”
Inflation is not likely to be an issue for “some time, ” the Fed statement added, citing continued “ resource slack.” In addition, the Fed noted that “investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.”
The Fed also noted that it is winding down the “special liquidity facilities” it had started during the crisis, concluding the Term Assed-Backed Securities Loan Facility at the end of June. It is also finishing a buying program of $175 billion in agency debt and $1.25 trillion in agency mortgage-backed securities. This program is nearly complete and should be finished per its previously announced schedule by the end of March.