The Federal Reserve on Wednesday held its base rate near zero, as it predicted a "gradual resumption of sustainable economic growth" without inflationary pressures. Concluding a two-day meeting, the policymaking Federal Open Market Committee, as widely expected, left the base federal funds rate in a range of zero to 0.25 percent.
The FOMC said the economy remained weak but was showing signs of improvement. "Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing," the panel said. "Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilise financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability."
Dismissing the notion that its stimulus effort would spark inflationary pressures, the panel said it expects "that inflation will remain subdued for some time." On the economic outlook, the FOMC said that "conditions in financial markets have generally improved in recent months."
It added that household spending "has shown further signs of stabilising but remains constrained by ongoing job losses, lower housing wealth, and tight credit." "Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales," the FOMC stated.
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