Fed to Hold Rates Down Until Jobless Rate Is Below 6.5%

The Federal Reserve said Wednesday that it would maintain its efforts to revive the economy in the new year by continuing its monthly purchases of $85 billion in Treasury bonds and mortgage-backed securities.

The Fed said it would keep buying bonds until the outlook for the labor market improves substantially, reiterating a policy it first announced in September. 

Looking even further into the future, the Fed said that it expected to maintain short-term interest rates near zero, even after it stops buying bonds, for as long as the unemployment rate remained above 6.5 percent, provided that medium-term inflation does not exceed 2.5 percent. The November jobless rate was 7.7 percent. 

That replaces the central bank’s earlier guidance that it expected interest rates to remain near zero at least until mid-2015, further emphasizing that reducing unemployment is now the Fed’s priority.(more)