Information received since the Federal Open MarketCommittee met inJuly
suggests that economicactivity has
of labor market conditions have shown
recentmonths,but the unemployment rate remains elevated.
suggest that household
spending and business fixed investmentadvanced,
while the recovery in
the housing sectorhas been strengthening,
rates have risen further and fiscal
somewhat in recent months. Fiscal
policyis restraining economicgrowth. Apart from fluctuations dueto changes in energy prices,inflation has been running below the Committee’s longer-runobjective, but longer-term inflation expectations have remainedstable.Consistent with its statutory mandate, the Committee seeksto foster maximum employment and price stability. The Committeeexpects that, with appropriate policy accommodation, economicgrowth will pick up from its recent pace and the unemploymentrate will gradually decline toward levels the Committee judgesconsistent with its dual mandate. The Committee sees thedownside risks to the outlook for the economy and the labormarket as having diminished, on net, since last fall
financialconditions observed in recent months, if
sustained, could slow the pace of improvement in theeconomy and labor market.TheCommittee recognizes that inflation persistently below its 2percent objective could pose risks to economic performance, butit anticipates that inflation will move back toward itsobjective over the medium term.Taking into account the extent of federal fiscalretrenchment
over the past year
, the Committee sees theimprovement in economic activity and labor market conditionssince it began its asset purchase programa year agoas consistent withgrowing underlying strength in the broader economy. However, theCommittee decided to await more evidence that progress will besustained before adjusting the pace of its purchases.Accordingly, the Committee decided to continue purchasingadditional agency mortgage-backed securities at a pace of $40billion per month and longer-term Treasury securities at a paceof $45 billion per month. The Committee is maintaining itsexisting policy of reinvesting principal payments from itsholdings of agency debt and agency mortgage-backed securities inagency mortgage-backed securities and of rolling over maturingTreasury securities at auction. Taken together, these actionsshould maintain downward pressure on longer-term interest rates,support mortgage markets, and help to make broader financialconditions more accommodative, which in turn should promote astronger economic recovery and help to ensure that inflation,over time, is at the rate most consistent with the Committee’sdual mandate.