WASHINGTON (March 21, 2013) — The Federal Reserve Open Market Committee foresees a return to moderate economic growth after a market interruption in late 2012, the Fed said in its latest release.
However, the Fed's current stimulus measures—including aggressive purchases of Treasury securities and keeping a key interest rate at near zero—are likely to remain in place for at least one or two more years, it said.
Issuing a statement March 20, the Fed said it based its new forecast on information it received since its last meeting in January.
"Labor market conditions have shown signs of improvement in recent months, but the unemployment rate remains elevated," the Fed said in its statement. "Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive."
The Fed said it continues to see downside risks to the economic outlook, as well as an inflation rate that will run at or below 2 percent for the medium term.
To support a stronger economic recovery and keep inflation in check, the Fed will continue to purchase $40 billion worth of mortgage-backed securities and $45 billion worth of longer-term Treasury securities every month, it said.
It also will keep the federal funds rate—the interest rate at which banks lend to other banks—at zero to ¼ percent for as long as the unemployment rate remains above 6.5 percent, it said. For February—the latest figures available—the Bureau of Labor Statistics said the unemployment rate was at 7.7 percent.