The Federal Reserve, saying economic growth had “paused” in recent months, announced Wednesday it will continue its $85 billion monthly bond buying and hold interest rates near zero until unemployment falls to at least 6.5 percent.
The central bank decision, which followed a two-day meeting, had been widely expected, especially after a surprising decline in U.S. economic growth for the fourth quarter.
Earlier Wednesday, the government announced that GDP unexpectedly suffered its first decline since the 2007-09 recession, falling at a 0.1 percent annual rate after growing at a 3.1 percent clip in the third quarter. (Read More: GDP Shows Surprise Drop)
Markets showed relatively little reaction to the GDP report, in part because it reinforced expectations that the Fed will continue to provide stimulus as long as the economy is weak. Stocks were slightly lower after the Fed decision. (Read More: Stocks Listless After Fed Decision)
“The report, noisy as it is, may help ease ideas that has surfaced earlier this month that the Fed may look to soon pull back from its asset purchases,” wrote Marc Chandler, chief currency strategist at Brown Brothers Harriman. (Read More: Why Markets Aren’t Worried About Bad GDP)
The minutes of the last Fed meeting in December showed that some Fed members thought QE should end this year, a comment that helped send interest rates higher this month.