Economic recovery is proceeding at a moderate pace and labor markets are improving gradually, the committee reported.
“The committee will regularly review the size and composition of its securities holding in light of incoming information and is prepared to adjust those holdings as needed to best foster maximum employment and price stability,” according to the news release.
During his first-ever news conference, held after Wednesday’s meeting, Federal Reserve Chairman Ben S. Bernanke defended the Fed’s second round of quantitative easing — known as QE2 — saying that it was not expected to be “a panacea.” But he added that current economic conditions do not necessitate QE3.
He said the ending of QE2 is unlikely to have a significant effect on financial markets or the overall economy. “The markets have anticipated this step,” he said.
Mr. Bernanke noted that much of the economic slowdown in the first quarter of 2011 was “transitory,” adding that the committee expects weak exports and defense spending to pick up through the course of the year. “Currently, as the statement suggests, we are in a moderate recovery,” he said.
Colin Robertson, managing director of fixed income for Northern Trust Global Investments, said in a telephone interview that Mr. Bernanke mentioned that zero inflation is not in the best interest of the economy or the Fed. Most central bankers intend for an inflation rate close to 2%, which is the Fed’s long-term goal, Mr. Roberston said.
“He said the balance sheet at the Fed is being held steady, and when it lets securities roll off it is de facto tightening of monetary policy. He mentioned that it would be an early move but would be the start of the process,” Mr. Robertson said.