(Bloomberg News) The Federal Reserve said the economy has slowed and foreshadowed new steps to boost the weakening expansion.
"Economic activity decelerated somewhat over the first half of this year," the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. "The committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."
Chairman Ben S. Bernanke held off on stepping up record stimulus even as consumer spending flagged, economic growth slowed and unemployment persisted at 8.2 percent. Before their next meeting starts Sept. 12, Bernanke and his colleagues will assess reports on unemployment in July and August, and the European Central Bank may take steps to ease Europe's debt crisis at a meeting tomorrow.
The FOMC said in today's statement that "household spending has been rising at a somewhat slower pace than earlier in the year."
The Fed said it will continue swapping $667 billion of short-term debt with longer-term securities to lengthen the average maturity of its holdings, an action dubbed Operation Twist. The central bank will also continue reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities.
The Fed left unchanged its statement that economic conditions would likely warrant holding the benchmark Fed funds rate near zero "at least through late 2014."
Inflation Outlook
Policy makers said inflation would run "at or below" their goal of 2 percent for the personal consumption expenditures index, the same as in the last statement.
Consumer prices in June rose 1.5 percent from a year earlier, the Commerce Department reported yesterday. Excluding food and energy, prices increased 1.8 percent.
Richmond Fed President Jeffrey Lacker dissented for the fifth consecutive meeting, saying he preferred to omit the 2014 time horizon. Lacker opposed the FOMC's June decision to extend Operation Twist through the end of the year and has said he expects interest rates will need to be raised in 2013.
Twelve percent of economists surveyed by Bloomberg News predicted that the FOMC would announce a new round of large scale asset purchases today, while 48 percent forecast such purchases would be announced at the Fed's Sept. 12-13 meeting.
Growth Forecasts