Release Date: January 27, 2010
For immediate release
Information received since the Federal Open Market Committee met in
December suggests that economic activity has continued to strengthen
and that the deterioration in the labor market is abating. Household
spending is expanding at a moderate rate but remains constrained by a
weak labor market, modest income growth, lower housing wealth, and
tight credit. Business spending on equipment and software appears to be
picking up, but investment in structures is still contracting and
employers remain reluctant to add to payrolls. Firms have brought
inventory stocks into better alignment with sales. While bank lending
continues to contract, financial market conditions remain supportive of
economic growth. Although the pace of economic recovery is likely to be
moderate for a time, the Committee anticipates a gradual return to
higher levels of resource utilization in a context of price stability.
With substantial resource slack continuing to restrain cost pressures and with longer-term
inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds
rate at 0 to 1/4 percent and continues to anticipate that economic
conditions, including low rates of resource utilization, subdued
inflation trends, and stable inflation expectations, are likely to
warrant exceptionally low levels of the federal funds rate for an
extended period. To provide support to mortgage lending and housing
markets and to improve overall conditions in private credit markets,
the Federal Reserve is in the process of purchasing $1.25 trillion of
agency mortgage-backed securities and about $175 billion of agency
debt. In order to promote a smooth transition in markets, the Committee
is gradually slowing the pace of these purchases, and it anticipates
that these transactions will be executed by the end of the first
quarter. The Committee will continue to evaluate its purchases of
securities in light of the evolving economic outlook and conditions in
financial markets.
In light of improved functioning of financial markets, the Federal
Reserve will be closing the Asset-Backed Commercial Paper Money Market
Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility,
the Primary Dealer Credit Facility, and the Term Securities Lending
Facility on February 1, as previously announced. In addition, the
temporary liquidity swap arrangements between the Federal Reserve and
other central banks will expire on February 1. The Federal Reserve is
in the process of winding down its Term Auction Facility: $50 billion
in 28-day credit will be offered on February 8 and $25 billion in
28-day credit will be offered at the final auction on March 8. The
anticipated expiration dates for the Term Asset-Backed Securities Loan
Facility remain set at June 30 for loans backed by new-issue commercial
mortgage-backed securities and March 31 for loans backed by all other
types of collateral. The Federal Reserve is prepared to modify these
plans if necessary to support financial stability and economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A.
Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K.
Tarullo; and Kevin M. Warsh. Voting against the policy action was
Thomas M. Hoenig, who believed that economic and financial conditions
had changed sufficiently that the expectation of exceptionally low
levels of the federal funds rate for an extended period was no longer
warranted.