The FOMC statement, as revised:
Information received since the Federal Open Market Committee met in
DecemberJanuary suggests that economic activity has continued to strengthen and that the deterioration in thelabor market is abatingstabilizing. Household spending is expanding at a moderate rate but remains constrained by a weak labor markethigh unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contractinghas risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls . Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack continuing to restrain cost pressures and
withlonger-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve
is in the process ofhas been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt . In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these; those purchases are nearing completion, and the remaining transactions will be executed by the end of the first quarterthis month. The Committee will continue to evaluate its purchases of securities in light of the evolvingmonitor the economic outlook and conditions in financial marketsfinancial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
In light of improved functioning of financial markets, the Federal Reserve
will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announcedhas been closing the special liquidity facilities that it created to support markets during the crisis. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit wil be offered at the final auction on March 8. The anticipated expiration dates forThe only remaining such program, the Term Asset-Backed Securities Loan Facility remain set at, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral . The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that
economic and financial conditions had changed sufficiently thatcontinuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.