Federal Reserve policymakers left the target range for the federal funds rate unchanged at zero to 25 basis points and indicated that the rate would remain low for some time.
“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,” according to a statement today by the Federal Open Market Committee, which sets the rate.
The FOMC originally dropped the target range for the federal funds rate to zero to 25 basis points exactly one year ago.
The FOMC statement also said that in the last month, economic activity has continued to pick up and the deterioration in the labor market has been abating.
“Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth and tight credit,” the FOMC statement added. “Although economic activity is likely to remain weak for a time, the committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.”
“Once again, the FOMC upgraded its assessment of economic and financial conditions but not enough to hint that rates would rise for an extended period,” said Dan Dektar, chief investment officer of fixed-income manager Smith Breeden Associates. “We think the ‘extended period' is several weeks shorter than it was following the last Fed meeting.”