It was more of the same from the Federal Reserve’s Open Market Committee this month: the target federal funds rate will remain between zero and 0.25%, and the Fed’s securities purchases will continue at the pace of $85 billion per month.
The FOMC also repeated its position that the fed funds rate will remain unchanged as long as the unemployment rate remains above 6.5% and inflation projections remain below 2.5%.
The Fed also released Wednesday a collection of economic projections compiled from its board members and bank presidents. Those projections anticipated the fed funds rate will likely remain at its current level through the end of 2014; however, all but one fed representative projected the rate will rise in 2015.
Three of the committee members projected the rate could rise to 3% by the end of 2015. In the longer run, the committee projected the fed funds rate will rise to around 4%.
Consistent with its rate projections and unemployment policy, the committee anticipated that the unemployment rate will continue its slow decline, falling to just above 7% by 2013 year-end and dropping to the target rate of 6.5% by early 2015.
Voting against the monetary policy action was St. Louis Fed President James Bullard, who according to the Fed release, believes the committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings.
Kansas City Fed President Esther L. George also voted against the June policy, citing concern that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.