Wednesday, June 22, 2011

US Federal Reserve Holds Monetary Policy Settings Unchanged

The US Federal Open Market Committee held the fed funds rate unchanged at 0 to 0.25 percent, and announced that it would finish the $600 billion asset purchase program or "Quantitative Easing II".  On quantitative easing the statement noted: "The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings.  The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate."

The Fed previously held the same monetary policy settings unchanged at its April meeting.  The US reported inflation of 3.6% in May, up from 3.2% in April, as high commodity prices caused a broader increase in prices.  Also kept in the statement was: "The Committee continues to anticipate that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period."

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