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Fed keeps policy unchanged; says it could increase or reduce bond buying

FXstreet.com (Córdoba) - The Federal Reserve decided to keep the rate for federal funds at a record low range of 0-0.25% to support the economic recovery. The Committee also voted to maintain the Fed's assts purchases at $85 billion per month and signaled it is prepared to either "increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes".

The Federal Reserve continues to anticipate that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5% and inflation between one and two years ahead is projected to be no more than a half percentage point above the 2% target.

In its policy statement released Wednesday, the FOMC said it continues to see downside risks to the economic outlook.

Regarding the timing to remove policy accommodation, the Fed will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. "When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent".

Voting against the action was Kansas City Fed President Esther George, who was concerned that the "continued high level of monetary accommodation increased the risks of future economic and financial imbalances" and could push long-term inflation expectations higher.

The minutes of this 2-day meeting will be released on May 22.

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