FOMC Sees Sustained Growth Five Years Away

It will be at least five years before the economy experiences a sustainable rate of growth and levels of unemployment and inflation acceptable to the Federal Reserve, the Federal Open Market Committee said in its Nov. 4 meeting. Meeting participants, including members of the Fed Board of Governors and the presidents of the Federal Reserve banks, believe economic recovery will be gradual, with real gross domestic product (GDP) growing at a moderate pace and the unemployment rate declining slowly over the next few years. During this time, inflation will remain subdued, the committee said. The committee increased its projections for real GDP growth for this year, after the second half of the year outperformed its original June projections. The committee also agreed to maintain the current 0 to 0.25% federal funds rate, noting economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The committee affirmed its intent for the Federal Reserve to purchase a total of $1.25trn of agency mortgage-backed securities and about $175bn of agency debt. Write to Austin Kilgore.

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