Feds Leave Interest Rates Unchanged, Cite ‘insufficient’ Recovery

In a unanimous vote, Federal Reserve policymakers held interest rates at historic lows and predicted they would remain near zero for the foreseeable future.

The Feds also expressed continued concern with the lackluster performance of the economic recovery.

In a statement released after the Federal Open Market Committee’s meeting, officials said that a review of December data "confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions."

The Feds cited growth in household spending, but that wasn’t enough to overcome high unemployment, modest income growth, lower housing wealth, and tight credit.

"Business spending on equipment and software is rising, while investment in non-residential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward," the report said.

The Feds also disclosed that it would continue expanding it holdings of securities, a policy move made in November 2010. Specifically, the FOMC said it would maintain its existing policy of "reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011."

"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period," it added.

You can read the Feds’ full statement at this link.