The Federal Reserve announced it would maintain its current monetary policy Wednesday, in line with expectations that the central bank will begin winding down its large-scale bond-buying program at its meeting in September.
The Fed, however, provided no further information about the schedule for tapering its stimulus purchases.
The Fed also acknowledged that inflation has been running below its target, but will not take additional steps to raise inflation, as it expects inflation to rise toward its 2 percent target in the medium term.
Few changes were expected from the Fed on Wednesday. Half of economists polled by Bloomberg responded that the Fed would begin scaling down its monthly asset purchases in September from the current $85 billion level, but none expected major action this week.
The monetary policy statement released Wednesday did indicate, however, that members of the Fed are taking notice of slowing economic growth and low inflation. The statement described growth as “modest,” but noted that “mortgage rates have risen somewhat” and warned that “fiscal policy is restraining economic growth” in an implicit rebuke of the spending cuts and tax hikes that Congress and the White House have overseen.
Earlier Wednesday, the Commerce Department reported that gross domestic product had increased by only 1.7 percent in the second quarter of 2013, and revised its estimate for first quarter GDP growth down to 1.1 percent, both well below the Fed’s previous projections.
Analysts expecting further details about future Fed policy were left disappointed. The Fed “did little to provide clarity on its forward guidance today or give a hint that it will start tapering at its September meeting,” Bloomberg LP senior economist Joseph Busuelas said via Twitter.
Some analysts had expected the Fed, led by chairman Ben Bernanke, to add to its forward guidance for interest rates by sketching out more fully the circumstances that would cause it to raise short-term rates above zero. Instead, there was no change from previous statements that the Fed will keep rates at zero until unemployment falls below 6.5 percent.
One member of the Fed’s monetary policy committee, Kansas City Federal Reserve Bank President Esther George, dissented from the decision on the grounds that further monetary conditions could raise inflation expectations.
St. Louis Fed president James Bullard, who had dissented from the June decision on the grounds that the Fed should do more to combat falling short-term inflation, this time voted along with the majority, a possible result of the statement including language warning of low inflation.