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September 18, 2013 at 11:02 AM
The Federal Reserve’s policymakers announced Wednesday that the Fed will not start winding down its $85 billion monthly bond-buying program.
Noting that the U.S. economy continues to expand at a “moderate” pace, the Federal Open Market Committee (FOMC) said in its announcement that it has decided nevertheless to continue buying additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.
“Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the FOMC said in a statement after concluding a two-day meeting.
Fed Chairman Ben Bernanke (left) said in a press conference following the announcement that the decision to hold off on tapering came as the FOMC witnessed signs of bond market tightening since its June meeting.
With the fed funds rate expected to remain at 1% for the foreseeable future, he said, the FOMC will make no change to forward guidance while maintaining its third round of quantitative easing at current levels.
“The committee is continuing its highly accommodative policy,” Bernanke said during a press conference where reporters peppered him with questions about the recent increase in bond market yields.
In response, Bernanke said “the committee has some concern if conditions tighten further,” and he stressed that U.S. economic growth has generally been proceeding at a moderate pace, even though the unemployment rate stands at unacceptable levels and inflation remains below the desired rate of 2%.
