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 late 2014, the Fed said in a release.
The committee said it has also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities.
Specifically, the committee intends to purchase Treasury securities with remaining maturities of six years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately three years or less.
This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative, the Fed said.
The committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.
The Fed said it is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
Information received since the committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated, the Fed said.
Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year.
Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable, the Fed said.
Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability. The committee said it expects economic growth to remain moderate over coming quarters and then to pick up very gradually.
Consequently, the group anticipates the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate.
Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Fed anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.