Market Watch

Fed Reiterates "Extended Period" of Low Rates with Lone Dissenter

The Federal Open Market Committee repeated its pledge to keep interest rates "exceptionally low" for "an extended period" and said inflation is "likely to be subdued for some time." Officials kept the benchmark overnight lending rate between banks in a range of zero and 0.25 percent, where it has been for over a year. Kansas City Fed President Thomas Hoenig cast a dissenting vote against the policy action saying "the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted."

"Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability," the FOMC said in its statement today following its two-day meeting. Policy makers noted that "business spending on equipment and software appears to be picking up," a change from the previous statement that said "businesses are still cutting back on fixed investment."

The FOMC and the Fed’s Board of Governors reiterated that most of the Federal Reserve's special liquidity facilities "will expire on Feb. 1." The Fed said it plans to end its mortgagebacked securities purchase program too, but used flexible language in saying it "will continue to evaluate its purchases of securities in light of the evolving economic outlook."

Equities rose, erasing earlier losses, and Treasuries fell following the announcement. The next meeting of the FOMC will take place on March 16.