FOMC to Maintain Current Interest Rates

The Federal Open Market Committee just issued this press release noting its outlook on the economy and potential interest rate moves. From the report, “the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent.  The Committee continues to anticipate that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate for an extended period.” The critical extended period note means the FOMC is unlikely to make a move on rates this quarter.

Other important news on the future of QE initiatives, with QE2 set to end next week, the fed announced that it will continue to reinvest the principal, so we haven’t seen the end of the committee’s monetary policy moves. “The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings”

In the statement the Fed continued to express cautious optimism about the progress of the economic recovery, saying “recovery is continuing at a moderate pace, though somewhat more slowly than the Committee had expected.” Particular concerns were noted in a slumping job market, labor market indicators have been weaker than anticipated…unemployment rate remains elevated; however, the Committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline,” and a “depressed housing market.”

Federal Reserve Chairman Ben Bernanke will deliver his monthly report on the state of the economy this afternoon. Many expect that Bernanke will speak on the possibility of QE3, and the future of Fed’s monetary policy initiatives. You can follow our live coverage of the event at Wall St. Cheat Sheet.