Yesterday, the Federal Open Market Committee (FOMC) released a statement addressing the present state of the U.S. economy and prospects for changes in Federal Reserve's open market activities. Although the U.S. economy continues to contractcontraction, the statement notes that the pace of contraction appears to have slowed down since the FOMC's last meeting in March.
Although the FOMC acknowledges that the U.S. economic outlook has improved considerably over the last month, the FOMC believes there still remains “some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.” As a result the Federal Reserve “will employ all available tools to promote economic recovery and to preserve price stability.” The FOMC also stated that it “will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” The FOMC anticipates "that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability."
As announced last month the Federal Reserve “will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year.” The Federal Reserve will also purchase up to $300 billion of longer-term Treasury securities over the next six months. The FOMC, however, will continue to monitor “the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” and the size and composition of the Federal Reserve's balance sheet in light of financial and economic developments.”