Fed Decision: Will Reinvest MBS, QE 1.999 Is Here As $250 Billion More In Debt Monetizations On Deck

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For immediate release

Information received since the Federal Open Market Committee met
in June indicates that the pace of recovery in output and employment has
slowed in recent months. Household spending is increasing gradually,
but remains constrained by high unemployment, modest income growth,
lower housing wealth, and tight credit. Business spending on equipment
and software is rising; however, investment in nonresidential structures
continues to be weak and employers remain reluctant to add to payrolls.
Housing starts remain at a depressed level. Bank lending has continued
to contract. Nonetheless, the Committee anticipates a gradual return to
higher levels of resource utilization in a context of price stability,
although the pace of economic recovery is likely to be more modest in
the near term than had been anticipated.

Measures of underlying inflation have trended lower in recent
quarters and, with substantial resource slack continuing to restrain
cost pressures and longer-term inflation expectations stable, inflation
is likely to be subdued for some time.

The Committee will maintain the target range for the federal
funds rate at 0 to 1/4 percent and continues to anticipate that 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.

To help support the economic recovery in a context of price
stability, the Committee will keep constant the Federal Reserve's
holdings of securities at their current level by reinvesting principal
payments from agency debt and agency mortgage-backed securities in
longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.

The Committee will continue to monitor the economic outlook and
financial developments and will employ its policy tools as necessary to
promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A.
Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K.
Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judges that
the economy is recovering modestly, as projected. Accordingly, he
believed that continuing to express the expectation of exceptionally low
levels of the federal funds rate for an extended period was no longer
warranted and limits the Committee's ability to adjust policy when
needed. In addition, given economic and financial conditions, Mr. Hoenig
did not believe that keeping constant the size of the Federal Reserve's
holdings of longer-term securities at their current level was required
to support a return to the Committee's policy objectives.

And whooooooosh:




10 Year: 2.80%...... 2.78%......2.76%......2.75%