US unemployment rate remains high

Economic activity across the US has been "expanding at a moderate pace" and labor market conditions have also improved recently but the unemployment rate "remains elevated," the Federal Reserve said Wednesday. The Federal Reserve's Open Market Committee (FOMC) said in a statement: "Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable." "Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy," according to the statement. However, the Committee decided to "await more evidence that progress will be sustained before adjusting the pace of its purchases," so accordingly, the FOMC decided "to continue purchasing additional agency mortgage-backed securities at a pace of USD 40 billion per month and longer-term Treasury securities at a pace of USD 45 billion per month," which is considered an unexpected and surprise move. The Committee "will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability." In addition, the Committee decided "to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's two percent longer-run goal, and longer-term inflation expectations continue to be well anchored." The statement noted that the Committee "sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market." "The Committee recognizes that inflation persistently below its two percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term," the statement added.