Fed leaves monetary policy in place

May 1, 2013 at 4:57 PM
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WASHINGTON, May 1 (UPI) -- The U.S. Federal Reserve said Wednesday it will keep its monetary policy intact, leaving security purchases and interest rates where they are for now.

The Fed, wrapping up a two-day meeting, said the federal fund rate -- the overnight rate at which it lends to banks -- would remain at zero to 0.25 percent, and said it would maintain a policy of purchasing $40 billion per month in Treasury securities and $45 billion per month in mortgage-backed securities.

The asset purchases are intended to keep liquidity in the financial market and to convince businesses that interest rates would remain low for an extended period.

The Fed repeated its target of 6.5 percent unemployment as a likely threshold that would prompt a change in its federal fund rate.

The Fed said it might accelerate the stimulus if the economy weakens, saying it could increase or reduce bond purchases "as the outlook for the labor market or inflation changes," The Washington Post reported.

The bank "currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the (Open Market) Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored."

The Fed said in a statement after the meeting the economic recovery is moving ahead at a "moderate pace" and took note of a strengthening housing market, but said "fiscal policy in restraining growth" -- a reference to across-the-board federal spending cuts known as the sequester, the Post said.

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