Chairman Ben S. Bernanke said the Federal Reserve is considering additional asset purchases to boost growth after extending its pledge to keep interest rates low through at least late 2014.
Policy makers are “prepared to provide further monetary accommodation if employment is not making sufficient progress towards our assessment of its maximum level, or if inflation shows signs of moving further below its mandate-consistent rate,” Bernanke said at a news conference today after a Federal Open Market Committee meeting in Washington. Bond buying is “an option that’s certainly on the table.”
Stocks and Treasuries rose after the Fed extended its previous pledge to keep borrowing costs low at least until the middle of 2013. Fed officials lowered their forecasts for economic growth and price increases this year and in 2013 and set a long-term goal of 2 percent inflation.
“What they’re doing is setting the table for some sort of additional monetary easing,” said Scott Minerd, chief investment officer in Santa Monica, California for Guggenheim Partners LLC. “The changes in the statement from last month de- emphasize growth.”
The Standard & Poor’s 500 Index climbed 0.9 percent to 1,326.06 at 4:07 p.m. in New York. The yield on the current five-year note fell 10 basis points to 0.80 percent after touching the record low of 0.76 percent.
“The Committee expects to maintain a highly accommodative stance for monetary policy,” the FOMC said in a statement. “Economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
Growth Forecast
The Fed lowered its forecast for growth this year to 2.2 percent to 2.7 percent, down from a projection of 2.5 percent to 2.9 percent in November. It predicted the economy next year will expand 2.8 percent to 3.2 percent, down from a previous forecast of 3.0 percent to 3.5 percent.
The Fed has been “quite active” in its accommodative policies, including through the extension of the rate commitment today, Bernanke said.
“We hope to convey to the market the extent to which there is support on the committee for maintaining rates at a low level for a significant time,” he said.
In a separate statement of its long-range goals and strategy, the FOMC specified a 2 percent goal for inflation, as measured by the annual change in the price index for personal consumption expenditures.
