As expected, the Federal Open Market Committee (FOMC) held interest rates steady on Wednesday, June 23, once again making no changes to its historically low benchmark rate.
“The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” the Federal Reserve’s policymaking committee said in a release.
The FOMC has kept interest rates at historic lows near zero since December 2008.
Voting against the policy action was Thomas M. Hoenig, “who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly,” the release stated.
Voting for the FOMC monetary policy action were Fed Chairman Ben Bernanke, Vice Chairman William Dudley, James Bullard, Elizabeth Duke, Donald Kohn, Sandra Pianalto, Eric Rosengren, Daniel Tarullo, and Kevin Warsh.
The FOMC is now between a rock and a hard place, confronted with the limits of monetary policy when rates are zero, said Steve Blitz, senior economist with New York-based Majestic Research, in an e-mail.
“The Fed is telling us that deflation risk is now on the table,” he said. “As for Hoenig’s dissent, it had to stay considering that its removal would’ve signaled that the Fed lurched to one step from pressing the panic button.”
Read a story about economists’ view of the fed funds rate from the archives of InvestmentAdvisor.com.