For immediate release
Information received since the Federal Open Market Committee met in April suggests that economic growth remains anemic. Labor market conditions are weakening and the unemployment rate continues to remain elevated. Household spending and business fixed investment appears to be slowing down. Inflation has moderated in recent months. Long-term inflation expectations remain well anchored.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a sluggish pace of economic growth over coming quarters as the crisis in Europe, the slowdown in Asia, and the uncertainty over year-end fiscal austerity plans are creating significant headwinds for the economy. These developments along with the economy operating below its full-employment level indicates that further action is warranted by the Committee.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to begin a new conditional asset purchasing program tied to an explicit growth path for nominal GDP. The Committee believes that nominal GDP should expand to $16 trillion dollars and grow at a 5% annual pace thereafter. To this end, the Committee intends to purchase Treasury and Agency securities every week until this target is hit.
This program should raise expectations of future nominal GDP growth and cause a rebalancing of portfolios that will facilitate a rise in current aggregate nominal spending. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant a new conditional asset purchase program.
Update: Well, this press release did not happen. Instead we got an extension of Operation Twist. Yawn.