U.S. Federal Reserve officials said their benchmark interest rate will stay low until at least late 2014 and anticipate that unemployment will remain high and inflation "subdued."
"The Committee expects to maintain a highly accommodative stance for monetary policy," the Federal Open Market Committee said in a statement released in Washington Wednesday.
"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."
The Fed extended its previous pledge to keep rates low at least until the middle of 2013 as more than two years of economic growth have failed to push unemployment below 8.5%. Fed officials in a separate statement Wednesday lowered their forecasts for economic growth and inflation this year and in 2013.
Fed Chairman Ben S. Bernanke, speaking at a news conference after the statements, said that the option of further large- scale bond purchases is still "on the table.
"If inflation is going to remain below target for an extended period and employment progress" is very slow, then "there is a case" for additional monetary stimulus, he said.
The Fed lowered its forecast for growth this year to 2.2% to 2.7%, down from a projection of 2.5% to 2.9% in November. It predicted the economy next year will expand between 2.8% to 3.2%, down from a previous forecast of 3.0% to 3.5%.
In a separate statement of its long-range goals and strategy, the FOMC specified a 2% goal for long-term inflation, as measured by the annual change in the price index for personal consumption expenditures.
"Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability," the panel said in a statement. It also enhances "the committee’s ability to promote maximum employment in the face of significant economic disturbances."
Policy makers declined to specify a goal for employment, saying that it "is largely determined by non-monetary factors." The committee’s longer-run forecast for the jobless rate is 5.2% to 6%.
The Fed said it would continue to extend the average maturity of its $2.6-trillion U.S. securities portfolio, a move dubbed "Operation Twist." The Fed also maintained its policy of reinvesting maturing housing debt into agency mortgage-backed securities.
"The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually," the statement said. "The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee’s dual mandate."
Richmond Federal Reserve Bank President Jeffrey Lacker dissented, and "preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate."
Recent reports on manufacturing, housing and employment indicated that the economy was picking up speed as the new year began.
Employers added 200,000 jobs in December, twice the previous month’s pace, and the unemployment rate dropped to 8.5% from 8.7% the month before.
The Fed’s $2.3-trillion U.S. of bond purchases in two rounds of so-called quantitative easing haven’t stoked inflation. A gauge of consumer prices tied to personal expenditures, excluding food and energy, rose 1.7% for the 12 months ending November.
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