The Federal Reserve’s monetary policy making 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 of the federal funds rate for an extended period.” 
• Economic Activity:  “Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months....Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.” 
• Financial Markets:  “Bank lending has continued to contract.”
• Housing Sector:  “Housing starts remain at a depressed level.”
• Households and Businesses: “Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls.”
• Inflation:  “Measures of underlying inflation have trended lower in recent quarters and, with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.”
• Future Fed Policy: “The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.”
• “To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.¹ The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.”
• Members’ Voting Record: “Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and limits the Committee's ability to adjust policy when needed. In addition, given economic and financial conditions, Mr. Hoenig did not believe that keeping constant the size of the Federal Reserve's holdings of longer-term securities at their current level was required to support a return to the Committee's policy objectives.”

Next Fed Meeting:  The next scheduled FOMC meeting is September 20-21.