The Federal Reserve announced no significant changes to U.S. monetary policy Wednesday afternoon, meaning that its $85 billion-a-month bond-buying program will remain in place and at its current size for now. No major moves were expected.
In a statement released at the end of a two-day meeting, the central bank said that it will "await more evidence that progress will be sustained" before slowing its purchases of Treasury bonds and mortgage-backed securities. The Fed also reaffirmed the second part of its stimulus program, the promise to keep short-term interest rates near zero until the unemployment rate falls to 6.5 percent.
Wednesday’s announcement follows a September meeting in which Chairman Ben Bernanke surprised markets by announcing no taper and giving a press conference that included hints that he was less inclined to pull back stimulus than widely thought. Bernanke said that contrary to many investors’ expectations, he didn’t “recall stating that we would do any particular thing in this meeting,” and backed off an earlier tentative plan to put the bond purchases on a course to fall to zero when the unemployment rate dropped to 7 percent.
Bernanke said that “asset purchases are not on a preset course” and that the decision to change the size of the stimulus “will remain contingent on the economic outlook.” Stock markets immediately soared following his statements.
Most investors now expect the Fed to continue adding stimulus well into next year. A CNBC survey last week showed that 45 percent of professional economists, strategists and money managers expect the Fed to begin tapering in April 2014, with a plurality believing that it will have completely wound down its asset purchases by October. Some analysts have suggested, however, that a reduction in the size of the purchases could come as early as December.
Wednesday's announcement contained one small change that could be taken as a hint that the taper will come earlier rather than later: a passage warning of "tightening of financial conditions" in September's release was left out of Wednesday's version, suggesting that officials may be less worried about rising interest and mortgage rates than previously thought.
Otherwise, the release contained no signs that Fed officials are worried about the economy slowing or afraid of the fallout from Congress' brush with the debt ceiling and the government shutdown earlier in October. The only indirect mention those events received was a single sentence: "Fiscal policy is restraining economic growth."