Informing the public about the Federal Reserve
Why do the U.S. economic recovery and labor market require ongoing monetary policy support through the purchase of longer-term Treasury securities and agency mortgage-backed securities?
The Federal Reserve conducts monetary policy to foster its statutory objectives of maximum employment, price stability, and moderate long-term interest rates. Since late 2008, the Federal Open Market Committee (FOMC) has maintained a highly accommodative stance of monetary policy intended to support economic recovery and ensure that inflation, over time, remains stable and near its longer-run goal of 2 percent. For some time, the unemployment rate has been above the level that most FOMC participants see as its longer-run normal value.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its statutory mandate, the Committee is continuing to purchase additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Asset purchases like these support the recovery by maintaining downward pressure on longer-term interest rates, such as mortgage rates, and by making broader financial conditions more favorable for household and business spending and investment.
The Committee will closely monitor incoming information on economic and financial developments in the coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. In judging when to moderate the pace of asset purchases, the Committee will, at its coming meetings, assess whether incoming information continues to support the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective. Asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook as well as its assessment of the likely efficacy and costs of such purchases.