The Federal Reserve said here Wednesday that the U.S. economic activity has been expanding at a "moderate pace" but that fiscal policy is "restraining" economic growth.
The Federal Open Market Committee (FOMC), which met in May, noted that the labor market conditions have shown "further improvement in recent months, on balance, but the unemployment rate remains elevated." The Committee added that inflation has been running "below" its longer-run objective, "but longer-term inflation expectations have remained stable." The Committee expects that "with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline." It also anticipates that inflation over the medium term likely will run "at or below" its two percent objective. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of USD 40 billion per month and longer-term Treasury securities at a pace of USD 45 billion per month." The FOMC affirmed that it will continue its purchases of Treasury and agency mortgage-backed securities "and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability." The FOMC said it decided to keep the target range for the federal funds rate at 0 to 0.25 percent and 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 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's two percent longer-run goal, and longer-term inflation expectations continue to be well anchored." "In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments," it noted.
It affirmed that when "the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of two percent."