The Federal Reserve said on Wednesday that it would maintain its bond-purchasing program for at least another month, citing an economy that has improved but has not sustained its progress.
“The [Federal Open Market] Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate,” the Fed said in a statement. “The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. The Committee recognizes that inflation persistently below its two percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”
The Fed also said it planned to maintain its rate of mortgage-backed securities purchasing at $40 billion per month and longer-term Treasury securities at $45 billion per month.
“Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate,” the Fed said.
The Fed said it would continue to monitor ongoing economic and financial developments, though it reaffirmed its view that a “highly accommodative” monetary policy will remain a viable plan after the asset purchase program ends.
The target range for the federal funds rate remains at 0 to 0.25 percent, which the Fed anticipates to stay the same until unemployment falls below 6.5 percent.
Since last year, the Fed has purchased $85 billion in bonds every month as part of an effort to keep interest rates, particularly on mortgages, low over the long term while the U.S. housing market continues its recovery—a program known as quantitative easing, CNN reports.
One challenge the Fed will face in coming months is the looming debate over the debt ceiling. If Congress fails to reach a short-term funding deal, portions of the government face an indefinite shutdown on Oct. 1, and the country could default on its debt.