Federal Reserve to Keep Benchmark Rate Unchanged

As expected, the Federal Reserve Open Market Committee (FOMC) voted today to keep the overnight federal funds rate unchanged at a range of zero to 0.25 percent. The committee pledged to keep the benchmark rate "exceptionally low" for an "extended period," stating that the "economic recovery is continuing at a moderate pace" and "longer-term inflation expectations have remained stable."

In regards to the Fed's quantitative easing program, the committee will complete its purchases of $600 billion of Treasury securities by the end of next week. Furthermore, the committee will reinvest "principal payments from its securities holdings." The committee will monitor and is prepared to adjust the size and holdings of its securities holdings as appropriate.

Comparing today's statement to the last FOMC meeting on April 27, the committee today noted that the rise in food and energy prices has dampened consumer purchasing power, while the committee in April expressed concerns about further price increases in crude oil due to global supply issues. In regards to the pace of overall economic recovery, the Fed noted the pace of recovery is currently moving "somewhat more slowly than the committee had expected" due to increases in commodity prices and "supply chain disruptions associated with the tragic events in Japan." In April the committee indicated that "the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually."

The decision was unanimous.