The Federal Reserve on Wednesday stuck to its plan to keep stimulating the U.S. economy until the job market improves and repeated its vow to keep rates near zero until mid-2015.
In a policy statement after a two-day meeting, the central bank acknowledged hints of strength in the U.S. housing market, but reiterated a pledge to continue supporting growth even as the recovery picks up.
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It said it would continue purchasing $40 billion in mortgage-backed debt per month to push interest rates lower.
The Fed did nod to a recent increase in inflation but said it was linked to higher energy prices, adding that inflation expectations have remained stable.
It also noted household spending has grown "a bit more quickly" but cautioned that business investment was softening.
"The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," the Federal Open Market Committee's statement said.
Richmond Fed President Jeffrey Lacker again dissented against the decision, as he has done at every meeting this year.
The Fed, which has held rates close to zero since December 2008, had already bought $2.3 trillion in mortgage-related and government debt before it launched its latest round of stimulus.
Some analysts have expressed concern the Fed's policies could spark inflation, but prices increases have remained tame so far.
The problem is, growth has, too. U.S. gross domestic product grew at an annual rate of just 1.3 percent in the second quarter. Economists expect the pace of recovery quickened a bit in the second quarter but not by enough to put steady downward pressure on the jobless rate.
At the same time, a looming tightening of U.S. fiscal policy risks tossing the economy back into recession.
Europe's debt crisis, a key source of concern for the Fed, also remains unresolved, although it is not flaring up too wildly in financial markets, offering comfort that the U.S. economy will escape any contagion.
TALKING THE TALK
Aside from their discussion over the stance of monetary policy, officials likely continued to debate fine-tuning their communications strategy by adopting numerical thresholds for economic variables that would guide the central bank's unconventional stimulus.
However, no new announcement was made. Analysts say to look to the Fed's next meetings in December or January for greater clarity on policymakers' goal posts.
Chicago Federal Reserve Bank President Charles Evans has advocated keeping rates near zero until the unemployment rate, currently at 7.8 percent, goes down to 7 percent, as long as inflation does not exceed 3 percent. The central bank formally targets 2 percent inflation.
Officials are also strongly considering the adoption of a consensus economic forecast for the central bank as a whole, as opposed to the quarterly individual projections for growth, employment, inflation and interest rates currently published.
The December meeting is seen as a good time for the Fed to re-evaluate the extent of its monthly bond purchases. In addition to its program to buy mortgage-backed debt, the Fed has been using proceeds from short-term government securities to buy longer-term ones. That program, known as Operation Twist, expires at the end of the year.
(Editing by Tim Ahmann and Andrea Ricci)