Fed leaves key rate unchanged Released 4/28/2010
Information received since the Federal Open MarketCommittee met in March suggests that economic activity has continued tostrengthen and that the labor market is beginning to improve. Growth inhousehold spending has picked up recently but remains constrained by highunemployment, modest income growth, lower housing wealth, and tight credit.Business spending on equipment and software has risen significantly; however,investment in nonresidential structures is declining and employers remainreluctant to add to payrolls. Housing starts have edged up but remain at adepressed level. While bank lending continues to contract, financial marketconditions remain supportive of economic growth. Although the pace of economicrecovery is likely to be moderate for a time, the Committee anticipates agradual return to higher levels of resource utilization in a context of pricestability.
With substantial resource slack continuing torestrain cost pressures and longer-term inflation expectations stable,inflation is likely to be subdued for some time.
The Committee will maintain the target range forthe federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subduedinflation trends, and stable inflation expectations, are likely to warrantexceptionally low levels of the federal funds rate for an extended period. TheCommittee will continue to monitor the economic outlook and financialdevelopments and will employ its policy tools as necessary to promote economicrecovery and price stability.
In light of improved functioning of financialmarkets, the Federal Reserve has closed all but one of the special liquidityfacilities that it created to support markets during the crisis. The onlyremaining such program, the Term Asset-Backed Securities Loan Facility, isscheduled to close on June 30 for loans backed by new-issue commercial mortgage-backedsecurities; it closed on March 31 for loans backed by all other types ofcollateral.
Voting for the FOMC monetary policy action were: Ben S. Bernanke,Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke;Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; andKevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, whobelieved that continuing to express the expectation of exceptionally low levelsof the federal funds rate for an extended period was no longer warrantedbecause it could lead to a build-up of future imbalances and increase risks tolonger run macroeconomic and financial stability, while limiting theCommittee’s flexibility to begin raising rates modestly.