Federal Reserve says no taper

The Federal Reserve will continue with its bond buying program full blast for at least another month. The economic outlook still remains too tepid to satisfy the central bank. Since last September the Fed has been buying $85 billion in bonds each month in an effort to lower long-term interest rates and the Fed plans on keeping that strategy in place for the time being.

By Annalyn Kurtz
September 18, 2013
CNN Money

The Federal Reserve will continue its bond-buying program at full blast for at least another month, as the economic outlook remains too tepid to satisfy the central bank.

"Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy," the Fed said in a statement.

"However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases."

Since last September, the Fed has been buying $85 billion in bonds each month in an effort to lower long-term interest rates, particularly on mortgages. The Fed plans to keep that strategy in place for the time being, and will re-evaluate the policy at its next meeting at the end of October.

The program, which is the third round of a controversial policy known as quantitative easing, still doesn't have a scheduled end date. But Fed Chairman Ben Bernanke has previously said he expects the purchases to end completely by the middle of 2014.

Since 2008, all three rounds of "QE" have led the Fed to accumulate more than $3 trillion in bonds.

Fed officials expect the unemployment rate, which was 7.3% as of August, to fall to between 7.1% to 7.3% by the end of the year. They also signaled a slightly gloomier forecast for broader U.S. economic growth for 2013 and 2014, but maintained more optimistic expectations for the years beyond that.

Bernanke has recently stressed that just because the Fed is slowing the bond purchases, that doesn't mean the Fed will raise its short-term interest rate any time soon. He is expected to repeat that message in a press conference at 2:30 p.m. ET.

The Fed repeated its ongoing goal to keep low interest rates in place until the unemployment rate falls to around 6.5%, as long as inflation doesn't accelerate beyond 2.5% a year. While the Fed's own forecasts predict they could reach the unemployment goal next year, 14 out of the 17 Fed officials who participated in the meeting this week still expect they'll keep the interest rate near zero until 2015.

The unemployment rate was 7.3% as of August, and the Fed's preferred measure of inflation has hovered around 1% since April.

Of the 10 Fed members who vote on monetary policy decisions, only Kansas City Fed President Esther George voted against Wednesday's decision. George has dissented at every Fed meeting this year, expressing concerns that Fed stimulus could increase "the risks of future economic and financial imbalances" and lead to a run-up in inflation over time.

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