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The U.S. Federal Reserve said Wednesday it has decided to maintain quantitative easing policy through $85 billion asset purchases per month to spur economic growth, while leaving its benchmark short-term interest rate at zero to 0.25 percent.
In a statement released after a two-day meeting of the Fed's policy-setting Federal Open Market Committee, the central bank also reiterated its intention to hold the federal funds rate steady in an exceptionally low range while the unemployment rate stays above 6.5 percent and inflation is forecast to remain below 2.5 percent.
The decision was overwhelmingly supported by the policy board members. Only Esther George, president of the Federal Reserve Bank of Kansas City, voting against it, on the grounds that the continued high level of monetary accommodation would increase the risk of future economic financial imbalances and could cause an increase in longer-term inflation expectations.
The Fed left its economic assessment unchanged from the previous policy meeting in March, saying, "Economic activity has been expanding at a moderate pace."
"Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated," the central bank said in the statement.
According to Labor Department data released early April, the jobless rate registered a 51-month low of 7.6 percent in March, down 0.1 percentage point from the previous month, while U.S. employers created only 88,000 nonfarm jobs, roughly half the average market forecast.
To support a strong economic recovery and help stabilize inflation in line with the bank's 2 percent target, the Fed "decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month."
"The committee will closely monitor incoming information on economic and financial developments in coming months," the central bank said, adding it will continue the asset purchases and employ its other policy tools as appropriate "until the outlook for the labor market has improved substantially in a context of price stability."
The Fed also said it is "prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market of inflation changes."
The benchmark short term interest rate has been pegged at zero to 0.25 percent since December 2008.
The central bank reiterated that it currently anticipate the ultralow interest rate will be appropriate "at least as long as the unemployment rate remains above 6.5 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2 percent longer-run goal and longer-term inflation expectations continue to be well anchored."
When the fed decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goal of maximum employment and inflation of 2 percent, the statement added.
The next FOMC meeting is scheduled for June 18-19.