Fed Stays Course to Keep 'Downward Pressure' on Interest Rates

Fed Stays Course to Keep 'Downward Pressure' on Interest RatesInterest rates on some financial products, primarily mortgages, may have nudged upward in recent weeks, but the Federal Reserve today said it will stay the course after a “pause” in economic growth.
The Fed announced that that it will continue its $85 billion monthly bond buying and hold the benchmark federal funds rate near zero. The Central Bank said it would do so until unemployment falls to at least 6.5 percent and the outlook on inflation is projected to be no more than a half percentage point above its 2 percent goal.
“Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” the Fed stated.
The Fed’s announcement followed a two-day meeting and had been expected. But it also came after a surprising decline in U.S. economic growth for the fourth quarter.
Earlier Wednesday, the government announced that GDP unexpectedly sustained its first decline since the 2007-09 recession, falling at a 0.1 percent annual rate after growing at a 3.1 percent rate in the third quarter.
Growth in “economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors,” the Fed said in its statement.
The Fed said it will continue purchasing additional mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. And it will continue reinvesting principal payments from its debt holdings.

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