Release Date: August 12, 2009
For immediate release
Information received since the Federal Open Market Committee met in
June suggests that economic activity is leveling out. Conditions in
financial markets have improved further in recent weeks. Household
spending has continued to show signs of stabilizing but remains
constrained by ongoing job losses, sluggish income growth, lower
housing wealth, and tight credit. Businesses are still cutting back on
fixed investment and staffing but are making progress in bringing
inventory stocks into better alignment with sales. Although economic
activity is likely to remain weak for a time, the Committee continues
to anticipate 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.
The prices of energy and other commodities have risen of late.
However, substantial resource slack is likely to dampen cost pressures,
and the Committee expects that inflation will remain subdued for some
time.
In these circumstances, the Federal Reserve will employ all
available tools to promote economic recovery and to preserve price
stability. The Committee will maintain the target range for the federal
funds rate at 0 to 1/4 percent and continues to anticipate that
economic conditions are likely to warrant exceptionally low levels of
the federal funds rate for an extended period. As previously announced,
to provide support to mortgage lending and housing markets and to
improve overall conditions in private credit markets, 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. In addition, the Federal Reserve is in the process of
buying $300 billion of Treasury securities. To promote a smooth
transition in markets as these purchases of Treasury securities are
completed, the Committee has decided to gradually slow the pace of
these transactions and anticipates that the full amount will be
purchased by the end of October. The Committee will continue to
evaluate the timing and overall amounts of its purchases of securities
in light of the evolving economic outlook and conditions in financial
markets. The Federal Reserve is monitoring the size and composition of
its balance sheet and will make adjustments to its credit and liquidity
programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles
L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel
K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
