US growth in economic activity has "picked up" recently, after having slowed "sharply" during the winter in part because of "adverse weather conditions," the Federal Reserve said Wednesday.
The Federal Open Market Committee (FOMC) noted in a statement that labor market indicators were mixed but on balance showed further improvement but that the unemployment rate remains "elevated." Fiscal policy is "restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective," but longer-term inflation expectations have "remained stable." The Committee expects that, "with appropriate policy accommodation, economic activity will expand at a moderate pace and labor market conditions will continue to improve gradually, moving toward those the Committee judges consistent with its dual mandate." The Committee recognizes that inflation persistently below its two percent objective "could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term." The Committee decided that beginning in May it will add to its holdings of agency mortgage-backed securities at a pace of USD 20 billion per month rather than USD 25 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of USD 25 billion per month rather than USD 30 billion per month.
The Committee will "closely monitor incoming information on economic and financial developments in coming months and 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." If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will "likely reduce the pace of asset purchases in further measured steps at future meetings." To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a "highly accommodative stance of monetary policy remains appropriate." "In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress, both realized and expected, toward its objectives of maximum employment and 2 percent inflation." The Committee continues to anticipate that it "likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's two percent longer-run goal, and provided that longer-term inflation expectations remain well anchored." 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." The Committee currently anticipates that "even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run