If the Federal Reserve intends to make news Wednesday, it will do so at the first ever post-decision press conference by a chairman of the institution at 2:15 p.m. today in Washington.
The policy-setting Federal Open Market Committee ended a two-day policy meeting with a decision to leave well enough alone. The 10-member committee voted unanimously to end the Fed's $600-billion (U.S.) asset-purchase program on schedule in June, and to repeat its intention to leave the benchmark interest rate near zero for and "extended period." The Fed also will continue to reinvest principal payments on the securities it holds in Treasury debt.
That's what most analysts were expecting. Thirty-three of 44 Wall Street economists in a Bloomberg News survey published Wednesday said they expect the central bank to keep the "extended period" language in place until the end of the year. Unlike the European Central Bank, which raised interest rates at its last meeting, U.S. policy makes remain more concerned about the downside risks that higher commodity prices pose to economic growth than the upside risks to inflation.
Low interest rates are necessary because the U.S. economy lacks serious momentum. Conditions are improving. Orders for equipment built to last at least three years climbed 2.5 per cent in March, the third consecutive monthly increase, according to a report Wednesday by the Commerce Department, and the Conference Board's index of consumer confidence rose to 65.4 in April from 63.8 in March. But the U.S. economy still has a long way to go.
"Information received since the (FOMC) met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labour market are improving gradually," the FOMC said.
The Fed said the economy is growing at a "moderate pace," compared to its March description of a "firmer footing."
Chairman Ben Bernanke and the rest of the policy committee are watching inflation. The FOMC noted that commodity prices have risen "significantly" since last summer, and that concerns about global supplies of crude oil have contributed to a further increase in oil prices since March. However, policy makers repeated that they expect the upward pressure on overall inflation will be transitory, although the Fed "will pay close attention to the evolution of inflation and inflation expectations."
Central banks always pay close attention to inflation and inflation expectations. The overriding concern at the Fed remains unemployment, which is "elevated," according to the statement.
The asset-purchase program has an expiration date. Not so loose monetary policy.