News Column

FOMC Keeps Stimulus in Place

October 30, 2013

Japan Economic Newswire

federal reserve
Federal Reserve Bank of New York (photo: FRBNB)

WASHINGTON, Oct. 30 -- The U.S. central bank, in line with market expectations, stopped short of scaling back the size of its quantitative easing Wednesday, citing the need to carefully watch economic trends before reducing the stimulus program.

The U.S. Federal Reserve maintained a policy of keeping its short-term interest rate at zero to 0.25 percent through the two-day meeting of its policy-setting Federal Open Market Committee.

The committee "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," it said in a statement repeating what it said after the previous FOMC meeting last month.

"In judging when to moderate the pace of asset purchases, the committee will...assess whether incoming information continues to support the committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective," it said.

According to employment data for September released last week, U.S. employers added fewer-than-expected 148,000 nonfarm jobs.

The latest issue of the Fed's economic report Beige Book said many district banks noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling crisis that emerged earlier this month.

The report, which provides an input to the committee's policymaking, was released Oct. 16.

Many markets analysts believed the Fed is likely to postpone tapering the quantitative easing through purchasing Treasury bonds and agency mortgage backed-securities, due to the looming uncertainty over the economic outlook.

Fed chairman Ben Bernanke has said the Fed will start tapering the size of the program possibly later this year on condition that the U.S. economy and employment situation continuously improve.

The Fed launched the asset buying program in September last year aiming to prop up the economy by providing more liquidity in the market.

It first purchased $40 billion of federal agency mortgage-backed securities each month and ratcheted up the size of the accommodative easing program three months later deciding to additionally buy $45 billion of U.S. government bonds.

(c) 2013 Kyodo News International, Inc.

Original headline: U.S. Fed stops short of scaling back monetary easing program

Source: (c) 2013 Kyodo News International, Inc.

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