The Fed kept policy rates unchanged and near zero with the funds target rate remaining at a range of zero to 0.25 percent. The key wording on policy guidance also is unchanged with the Fed continuing to state that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
Regarding the economy, the Fed has retained essentially the same characterization as in March though one might see very marginal positive comments about labor market improvement. Overall, the Fed sees the economy as "expanding moderately." But the labor market comments are cautionary.
"Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated."
The meeting statement is rather general in its commentary about the economic outlook, but at first glance, the Fed forecasts for the economy appear to be little changed, suggesting very gradual improvement in growth and an easing in inflation. We will get more details on the forecast at 2:00 p.m. ET when forecast tables are released.
"The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate."
On other policy issues, Operation Twist continues-the Fed continues to keep downward pressure on longer-term interest rates. The balance sheet is being maintained at high levels with reinvestment of principal paid on agency debt and mortgage-backed securities and rollover of Treasuries. There is no mention of QE3 but options remain open.
"The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining 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. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability."
Again, there was one dissenting vote.
"Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014."
Overall, despite some mixed signals from recent economic indicators, the Fed appears to be on hold. It is hard to see any differences between today's statement implications versus those in March. But there will be more details at 2:00 p.m. ET regarding Fed forecasts and the chairman's press conference is at 2:15 p.m. ET.
On the news, equities barely nudged lower.