The Federal Reserve rattled off several negative economy assessments Tuesday but decided to keep the federal funds interest rate at its current level.

 

The Federal Open Market Committee chose to maintain the target range for the federal funds rate at 0 to 0.25 percent. Officials noted that they continue 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 for the federal funds rate for an extended period.

 

Furthermore, this committee also plans to maintain its existing policy of reinvesting principal payments from its securities holdings

 

“Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months,” federal officials conceded.

 

“Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit,” they continued. “Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months.”

 

The Fed went on to note that this 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 modest in the near term.

 

Officials also elaborated more about potential inflation. They think measures of underlying inflation are currently at levels somewhat below those the committee judges most consistent.

 

“With its mandate to promote maximum employment and price stability and with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the committee considers consistent with its mandate,” federal officials said.

 

The committee also noted Tuesday that it plans to continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.

 

Sharing a breakdown of Tuesday’s vote, the fed indicated chairman Ben Bernanke and vice chairman William Dudley voted in favor of keeping the rate unchanged, along with committee members James Bullard, Elizabeth Duke, Sandra Pianalto, Eric Rosengren, Daniel Tarullo and Kevin Warsh.

 

Voting against the policy was Thomas Hoenig, who appears to believe that the economy continues to recover at a moderate pace.

 

“Accordingly, Hoenig 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 will lead to future imbalances that undermine stable long-run growth,” officials stated.

 

“In addition, given economic and financial conditions, Hoenig did not believe that continuing to reinvest principal payments from its securities holdings was required to support the committee’s policy objectives,” they concluded.