The Fed’s policy-setting Federal Open Market Committee said in a statement after a two-day meeting it intends to complete its $600 billion bond buying program in June as scheduled.
In the face of headwinds from high oil prices, the US central bank said the economic recovery was proceeding at a “moderate pace” — dialing back slightly from a statement in March when it said the economy was on “firmer footing.”
It again expressed confidence a surge in the cost of oil and other commodities would be transitory and not spark a broader inflation.
“Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued,” it said.
There were few surprises in the Fed’s statement and financial markets largely took it in stride. Stocks inched higher, the dollar held roughly steady and bonds cut losses.
“We did not expect any material surprises in the FOMC statement and there was none,” said Bret Barker, portfolio manager at TCW in Los Angeles. “It remains quite dovish.”
Nevertheless, the statement marked a near-conclusion — at least for now — of the massive expansion of the Fed’s balance sheet that helped pull the economy out of its deep recession.
The central bank said it would continue to reinvest proceeds from maturing securities it holds to keep its economic support in place.
The big question for investors, however, is what comes next.
Markets were looking for clues in a question and answer session Fed Chairman Ben Bernanke planned to hold with journalists.
The Fed cut interest rates to near zero in December 2008 and bought close to $1.4 trillion in longer-term securities to help spur a recovery from the economy’s deep recession.
When the recovery stumbled last year, it launched its latest program to buy government bonds.
The plan met with withering criticism domestically and internationally. Even some Fed officials worry it could stoke inflation.
