The Federal Open Market Committee (FOMC) decided to maintain its Fed Funds target rate at a range of 0%-1/4%.  In its statement, the FOMC acknowledged conditions in the labor market “have improved further,” and that consumer spending and business fixed investment “have continued to advance.”  Noting that while strains in global financial markets “have eased,” the continue to “pose significant downside risks to the economic outlook.”

The committee downplayed current inflation risks stating that “the recent increase in oil and gas prices will push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.”

In keeping its target Fed Funds rate steady, the FOMC stated: “To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

The FOMC also decided to continue its program, known as Operation Twist, to extend the average maturity of its holdings of securities as announced in September and to maintain its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

Federal Reserve Bank of Richmond President, Jeffrey Lacker, voted against the policy action because he “does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.”