http://thehill.com/policy/finance/218050-fed-trims-stimulus-vows-continued-supportBy Peter Schroeder - 09/17/14 02:14 PM EDT
The Federal Reserve on Wednesday pledged to keep interest rates near zero for a “considerable time” after its bond purchases likely end next month.
While the central bank continued to shrink its “quantitative easing” program with an eye towards eliminating it in October, officials gave no indication they were prepared to hike interest rates anytime sooner than previously expected, amid lingering concern about the economic recovery.
The Fed noted in its latest policy statement that the economy continues to grow moderately, but in a nod towards the struggles still felt by many of the unemployed and underemployed, that there is a “significant underutilization of labor resources."
The Fed has consistently trimmed the size of its monthly bond purchases since announcing plans to exit from the unprecedented stimulus. The central bank went through three rounds of “quantitative easing” after the recession, as near-zero interest rates failed to spur on the economy sufficiently.
But with the recovery seemingly taking hold, the Fed has shrank the size of its monthly purchases by $10 billion per month ever since announcing the wind-down at the end of 2013. At its current pace, the Fed would no longer buy extra bonds after its October meeting.
With that stimulus close to an end, all of the attention on Wall Street has turned towards when the Fed could hike interest rates for the first time since the financial collapse. At the close of its previous meeting, the Fed said it expected it would keep rates down for a “considerable time.”
While some Fed watchers suspected the central bank could trim that lengthy language in its latest statement, the Fed instead underlined its support for low rates by keeping the language intact in its latest statement.
Alongside that accommodative stance, the Fed also released economic projections that showed a slightly gloomier economic outlook. Fed officials expected the economy to grow slightly more slowly in the coming years than they did at their June meeting, although they also expected the unemployment rate to fall more quickly than they expected in June.
Nonetheless, the Fed also noted that it would soon be returning to more typical operations. In addition to its latest policy statement and updated economic projections from Fed officials, the central bank also released a set of principles for bringing its monetary policy back under more normal conditions.