Federal Reserve officials said they would begin running off their $4.5 trillion balance sheet "relatively soon" and left their benchmark policy rate unchanged as they assess progress toward their inflation goal.
The start of balance-sheet normalization — possibly as soon as September — is another policy milestone in an economic recovery now in its ninth year. The Fed bought trillions of dollars of securities to lower long-term borrowing costs after cutting the main interest rate to zero in December 2008.
"Near-term risks to the economic outlook appear roughly balanced," the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. "Household spending and business fixed investment have continued to expand."
Fed watchers had anticipated that the inclusion of the term "relatively soon" would signal the central bank could announce the timing of the balance-sheet reduction program at its next meeting, scheduled for Sept. 19-20. U.S. stocks rose slightly and 10-year Treasury yields fell following the Fed's statement.
"I expect an announcement of the onset of the balance-sheet reduction at the conclusion of the September meeting, effective on the first of October," Carl Tannenbaum, chief economist at Northern Trust, said after Wednesday's statement.