Fed doesn’t tinker with stimulus as US economy stalls

“The changes to the policy rationale were tilted to sound more affirmative in nature,” JPMorgan economist Michael Feroli wrote in note to clients.

A report on Friday is expected to show the US jobless rate remained stuck at 7.8% for a third straight month in January. The Fed repeated that it would keep overnight rates near zero until the unemployment rate hits 6.5%, as long as inflation does not threaten to exceed 2.5%.

“It’s a message that policy is steady as she goes,” said Julia Coronado, an economist at BNP Paribas in New York.

By and large, the statement was widely as anticipated, and US stocks. SPX, government bonds and the dollar .DXY were little changed after the news.

The Fed noted that consumer spending and business investment had picked up and the housing sector had shown further improvement. It also acknowledged calmer financial conditions in Europe, omitting a December warning that these posed a significant threat, although it said downside risks remained.

Kansas City Federal Reserve Bank President Esther George, in her first policy vote, dissented against continued Fed stimulus, picking up the mantle left behind by Richmond Fed chief Jeffrey Lacker, who dissented at every policy meeting last year.

The Fed's bond-buying program, under which it currently purchases $40 billion of mortgage-backed bonds and $45 billion of longer-dated Treasuries a month, is part of the central bank's unprecedented effort

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