FOMC Leaves Rates Unchanged; Announces "Exceptionally Low Rates Through 2014"

As expected, the FOMC left rates unchanged at 0.0% - 0.25% again today. However, the Committee also announced that it will leave rates exceptionally low through at least late 2014.

In its statement, the Federal Reserve signaled that the economy has been expanding “moderately”, despite “some slowing” in global growth.

Taken from the statement, regarding the Fed’s current monetary policies:

"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."

Below are the key points from the FOMC statement:

• The FOMC reiterated its “dual mandate” – Maximum employment and price stability.
  
• The economy has been “expanding moderately.”
  
• The Committee reaffirms that rates will stay exceptionally low through “at least late 2014.”
  
• The unemployment rate remains elevated.
  
• Inflation has been “subdued” in recent months, and longer-term inflation expectations are “stable.” However, the committee expects inflation will run at or below levels consistent with its dual mandate in the coming quarters.
  
• The Committee expects economic growth in the coming quarters to be “modest.”
  
• In order to promote a stronger pace of economic recovery, the FOMC will maintain a “highly accommodative” stance for monetary policy.
  
• Monetary policies currently underway will continue.
  
• The FOMC will continue to monitor the economic outlook and developments and “will employ policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.”

Stocks are higher in reaction to the FOMC statement release. The S&P 500 spiked roughly 6 points, while the DJIA rose ~60.

  S&P 500 - Intraday