The Federal Reserve’s monetary policymaking committee (the Federal Open Market Committee – FOMC) decided today to keep its target overnight interest rate (the “federal funds rate”) in a target range of 0% to 0.25%. 

Highlights of Today’s Policy Statement (available here):

Underlined text indicates noteworthy changes from the previous policy statement.

• Fed Funds Target Rate:  “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 for the federal funds rate for an extended period.”
• Economic Activity:  “Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions.… Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.”
• Housing Sector:  “The housing sector continues to be depressed.”
• Households and Businesses: “Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls.”
• Inflation:  “Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.”

“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.”

• Future Fed Policy: “To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.”
• “The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.”
• Members’ Voting Record: All 11 voting members of the FOMC voted in support of the monetary policy action.  New voting members for 2011 include: Charles L. Evans (Chicago), Richard W. Fisher (Dallas), Narayana Kocherlakota (Minneapolis), and Charles I. Plosser (Philadelphia).
• Next Fed Meeting:  The next scheduled FOMC meeting is March 15.