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US Fed decides to keep bond purchases unchanged
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The U.S. Federal Reserve announced on Wednesday that it would keep its monthly pace of bond purchases unchanged for now to stimulate the economy.
The Fed said the U.S. economy has been expanding at a "moderate pace," but it decided to await more evidence that the recovery will be sustained before adjusting the pace of buying 85 billion U. S. dollars a month in bonds.
"Mortgage rates have risen further and fiscal policy is restraining economic growth," the Fed said in a statement after a two-day policy meeting, warning that "the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."
The Fed is currently buying 45 billion dollars per month of Treasury debts and 40 billion dollars per month of mortgage-backed securities. Many investors expected the central bank to begin scaling back the quantitative easing by a modest 10 billion dollars to 15 billion dollars in its September meeting.
The Fed said asset purchases are not on a preset course and that decisions about the pace will be contingent on the economic outlook as well as the assessment of the likely efficacy and costs of such purchases.
It reaffirmed its pledge not to raise the federal funds rate as long as unemployment rate is 6.5 percent or higher and the outlook for inflation doesn't exceed 2.5 percent.
In an updated economic forecast, the Fed lowered the growth for 2013 to a 2 percent to 2.3 percent range, down from 2.3 percent to 2.6 percent in its June estimates. The downgrade for next year was even sharper as growth for 2014 is projected to stand at 2.9-3.1 percent, down from the previous outlook of 3-3.5 percent.
Most policy-makers with 12 out of 17 estimated that the first rise in federal funds rate from its current near-zero level would not come until 2015.
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