With a lone dissent, the ""Federal Open Market Committee"":http://www.federalreserve.gov/monetarypolicy/fomc.htm Wednesday voted no change in the target federal funds rate.[IMAGE]
After the meeting, the FOMC released its quarterly forecast of the economy and interest rates with more members of the Committee seeing higher rates in 2014 than in the prior forecast.
Of the 17 Committee members and alternates, 13 said the FOMC would increase interest rates no later than 2014 compared with the January forecast when 11 offered that view. All of those submitting forecast said rates would increase by 2015, while in the earlier forecast, two of the Committee members had rate hikes pushed out until 2016.
""The economy has been expanding moderately,"" the FOMC said in the statement issued at the conclusion of its two-day meeting, echoing language in the statement following its meeting last month. Ã¢â‚¬Å“Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.Ã¢â‚¬Â
In their forecasts, FOMC participants improved their outlook for Gross Domestic Product growth this year to a range of 2.4 to 2.9 percent from 2.2 to 2.7 percent in January. The outlook for GDP growth in 2013 and 2014 though was reduced.
The comments on the housing sector varied slightly from the March statement, which did not include any reference to Ã¢â‚¬Å“improvement.Ã¢â‚¬Â The major change in the assessment of the economy came in the description of inflation which was cited as Ã¢â‚¬Å“subduedÃ¢â‚¬Â in March while todayÃ¢â‚¬â„¢s statement acknowledged the impact of crude oil and gasoline prices on inflation.
That impact, the FOMC added, Ã¢â‚¬Å“is expected to affect inflation only temporarily,Ã¢â‚¬Â before returning inflation Ã¢â‚¬Å“at or below the rate that [the Committee] judges most consistent with its dual mandateÃ¢â‚¬Â of price stability and maximum sustainable economic growth.
In its forecast, inflation was expected to run slightly higher this year, 1.9 to 2.0 percent compared with 1.4 to 1.8 percent in the January forecast. But the FOMC also lowered the range for the unemployment rate this year to 7.8 to 8.0 percent from 8.2 to 8.5 percent. The range for the unemployment rate in 2013 was also lowered to 7.3 to 7.7 percent from 7.4 to 7.7 percent.
The Committee said it would ""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 at least through late 2014.""
The FOMCÃ¢â‚¬â„¢s overall economic outlook was more positive than it had been in March.
Ã¢â‚¬Å“The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually,Ã¢â‚¬Â it said in the statement. In March the Committee it Ã¢â‚¬Å“expects moderate economic growth over coming quartersÃ¢â‚¬Â with no reference to a longer term improvement.
As in March, the Committee said, ""strains in global financial markets continue to pose significant downside risks to the economic outlook.Ã¢â‚¬Â
The Committee said it Ã¢â‚¬Å“also decided to continue its program to extend the average maturity of its holdings of securitiesÃ¢â‚¬Â and would maintain Ã¢â‚¬Å“its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.
Richmond Fed President Jeffrey Lacker cast the only vote against the policy decision, as he had in March.