No change. For now.
The Federal Reserve has announced it will make no change in its bond-buying program that is keeping interest rates artificially low.
“The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions,” wrote the Federal Open Market Committee, the Fed’s policymaking committee, in an Oct. 24 statement issued at the end of its two-day meeting.
The Fed in September expanded bond purchases in a program some wags are calling “QEInfinity” because it calls for buying $40 billion of mortgage-backed securities a month for an unlimited amount of time to drive down mortgage interest rates. Others refer to it as “QE3” because it is the third round of money creation, or “quantitative easing,” the Fed has engaged in since the financial crisis hit in 2008.
“To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate [for full employment and price stability], the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month,” the FOMC wrote.
Longer Average Maturity
“The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it 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. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” the FOMC statement added.
Eleven of the 12 voting members of the FOMC backed the program in September, and it was another 11-1 vote to continue it. Fed officials maintain the program will boost the housing market and drive down long-term interest rates to spur spending and investment.
Fed officials in October said there has been some increase in household spending and indications of a stronger housing market.
Some analysts expect a big announcement from the Fed in December. A separate program call “Operation Twist,” under which the Fed has been buying $45 billion of long-term Treasury debt each month with the proceeds from selling shorter-term Treasury debt, is scheduled to end on December 31.