Tuesday, August 9, 2011

US FOMC Holds Fed Funds Rate at 0 to 0.25%

The US Federal Open Market Committee (FOMC) held the fed funds rate unchanged at 0 to 0.25 percent, and made no changes in regards to its completed quantitative easing programs.  The Fed noted: "The Committee currently anticipates 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 at least through mid-2013." - dropping the "extended period" comment and instead expecting to hold the rate until 2013.

The Fed previously held the same monetary policy settings unchanged at its June meeting.  The US reported inflation of 3.6% in both June and May, up from 3.2% in April, as high commodity prices caused a broader increase in prices.  Meanwhile the US economy grew 1.3% in Q2, compared to 0.4% in Q1 this year.  On quantitative easing, the FOMC said: "The Committee also 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."



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