September 13, 2012 FOMC Statement

FOMC statement

Federal Reserve issues FOMC statement

For immediate release

Information received since the Federal Open Market Committee met in June August suggests that economic activity decelerated somewhat over the first half of this year. has continued to expand at a moderate pace in recent months. Growth in employment has been slow in recent months, slow, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier continued to advance, but growth in the year. Despite business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, the housing sector remains depressed. albeit from a depressed level. Inflation has declined since earlier this year, mainly reflecting lower been subdued, although the prices of crude oil and gasoline, and longer-term some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects is concerned that, without further policy accommodation, economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to might not be consistent with its dual mandate. strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term will likely would run at or below the rate that it judges most consistent with its dual mandate. 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also decided to will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee These actions, which together will closely monitor incoming information increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on economic longer-term interest rates, support mortgage markets, and financial developments and will provide additional accommodation as needed help to promote a stronger economic recovery and sustained improvement in labor market make broader financial conditions in a context of price stability. more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

To support a stronger economic recovery continued progress toward maximum employment and to help ensure that inflation, over time, is at price stability, the rate most consistent with its dual mandate, the Committee expects to maintain that a highly accommodative stance for of monetary policy. policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates 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 are likely to be warranted at least through late 2014. mid-2015.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which economic conditions are likely to warrant an exceptionally low level of levels for the federal funds rate. rate are likely to be warranted.

Statement Regarding Transactions in Agency Mortgage-Backed Securities and Treasury Securities

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