FOMC Holds Off on Stimulus

Acknowledging ""economic activity decelerated somewhat over the first half of this year"" and ""growth in employment has been slow in recent months,"" the ""Federal Open Market Committee"":http://www.federalreserve.gov/monetarypolicy/fomc.htm nonetheless decided Wednesday to take no new actions to stimulate growth.

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Concluding a two-day meeting, the FOMC instead said it would maintain its low interest rate policy and continue previously announced programs to reinvest proceeds of maturing Treasury securities it already holds and extend the average maturity of its portfolio.

Those actions will not directly address the Federal Reserve's two policy mandates: price stability and maximum sustainable economic growth â€" usually measured by the unemployment rate.

Even the benign inaction drew a dissent from Jeffery Lacker, president of the Richmond Fed because he wanted to omit the time period over which rates would be exceptionally low. The FOMC said it would keep interest rates at current levels through the end of 2014.

There was no hint, in the FOMC's end-of-meeting statement, of additional quantitative easing or a move towards price level, inflation, or nominal GDP targeting.

In that statement, the Fed offered a subdued view of the economy with the only marginally positive comment an acknowledgement that inflation has declined and ""longer term inflation expectations have remained stable,"" the same language the FOMC used six weeks ago at the end of its last meeting.

""Household spending appears to be has been rising at a somewhat slower pace than earlier in the year,"" the FOMC said in its statement Wednesday, adding ""despite some further signs of improvement, the housing sector remains depressed.""

The FOMC voted to maintain the target funds rate in a range of 0 percent to 1/4 percent where it has been since December 2008. In addition, the Fed and said it continues to anticipate keeping the funds rate at ""exceptionally low levels"" through late 2014 because relatively soft economic growth, relatively low levels of resource utilization, and subdued inflation are expected to continue.

The Committee said it expects ""economic growth to remain moderate ... and then pick up very gradually"" but that ""the unemployment rate will decline only slowly"". The major downside risk continues to be ""strains in global financial markets.""