The Stimulus Ain't Over.

The Federal Reserve's statement on interest rates is out, HERE.

The bottom line on the release from the conclusion today of the Open Market Committee is that the expected taper of government securities purchases is modest, but the committee expects that interest rates will continue to be low as the economy recovers.  It will cut its buying program by $10 billion, to $85 billion.

Specifically, citing economic expansion since the most recent committee meeting in October, the committee focused on the improving U.S. employment market in its decision "to modestly reduce the pace of its asset purchases."

And at this writing, the stock market loves it.  CNBC has a report on gains right now HERE.

"Today’s policy actions reflect the committee’s assessment that the economy is continuing to make progress," said Fed Chairman Ben Bernanke at a press conference today, "but that it also has much farther to travel before conditions can be judged normal."  (You can find a transcript of Bernanke's briefing HERE. The press conference is live HERE until about 4 p.m.)

Starting next month, the committee said it will buy agency mortgage-backed securities at a pace of $35 billion per month, down from the monthly $40 billion rate.  And it will buy $40 billion per month in longer-term Treasury securities, down from a $45 billion-per-month rate.

What's it all mean?  The holdings, the Fed says, "should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate" to improve employment and keep prices stable.

The committee also reaffirmed its expectation that the current federal funds target range of 0% to .25% "will be appropriate at least as long as the unemployment rate remains above [6.5%], inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's [2%] longer-run goal, and longer-term inflation expectations continue to be well anchored.

The committee called this a "highly accommodative stance of monetary policy," and said it anticipates "that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time" that unemployment falles below 6.5%.

The Los Angeles Times' initial take on the Open Market Committee's actions can be found HERE.

A Wall Street Journal blog redlines the new statement against the previous statement linked in the first line of this post HERE.




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