Federal Funds Rate Stay at 0 to 1/4 percent
The Federal Open Market Committee decided today to keep its target range for
the federal funds rate at 0 to 1/4 percent. The Committee continues to
anticipate that economic conditions are likely to warrant exceptionally low
levels of the federal funds rate for some time. Information received since
the Committee met in December suggests that the economy has weakened
further. Industrial production, housing starts, and employment have
continued to decline steeply, as consumers and businesses have cut back
spending. Furthermore, global demand appears to be slowing significantly.
Conditions in some financial markets have improved, in part reflecting
government efforts to provide liquidity and strengthen financial institutions;
nevertheless, credit conditions for households and firms remain extremely tight.
The Committee anticipates that a gradual recovery in economic activity will
begin later this year, but the downside risks to that outlook are significant.
In light of the declines in the prices of energy and other commodities in recent
months and the prospects for considerable economic slack, the Committee
expects that inflation pressures will remain subdued in coming quarters.
Moreover, the Committee sees some risk that inflation could persist for a time
below rates that best foster economic growth and price stability in the longer
term. The Federal Reserve will employ all available tools to promote the
resumption of sustainable economic growth and to preserve price stability. The
focus of the Committee’s policy is to support the functioning of financial
markets and stimulate the economy through open market operations and other
measures that are likely to keep the size of the Federal Reserve’s balance sheet
at a high level. The Federal Reserve continues to purchase large quantities
of agency debt and mortgage-backed securities to provide support to the mortgage
and housing markets, and it stands ready to expand the quantity of such
purchases and the duration of the purchase program as conditions warrant. The
Committee also is prepared to purchase longer-term Treasury securities if
evolving circumstances indicate that such transactions would be particularly
effective in improving conditions in private credit markets. The Federal
Reserve will be implementing the Term Asset-Backed Securities Loan Facility to
facilitate the extension of credit to households and small businesses. The
Committee will continue to monitor carefully the size and composition of the
Federal Reserve’s balance sheet in light of evolving financial market
developments and to assess whether expansions of or modifications to lending
facilities would serve to further support credit markets and economic activity
and help to preserve price stability.