first time to keep its benchmark interest rate at a record low
at least through mid-2013 to revive a recovery that’s
“considerably slower” than anticipated.
The Federal Open Market Committee also discussed a range of
policy tools to bolster the economy and said it is “prepared to
employ these tools as appropriate,” it said in a statement
today in Washington. Three members of the FOMC dissented,
preferring to maintain the pledge to keep rates low for an
“extended period” without a specific timeframe.
The decision represents the biggest effort since November
to spark the U.S. economy and revive confidence while stopping
short of initiating a third round of large-scale asset
purchases. Chairman Ben S. Bernanke and his colleagues acted
after reports showed the economy was slowing and an
unprecedented downgrade to the U.S. credit rating sent stocks
tumbling from Sydney to New York.
The Fed offered a dimmer view of the economy than it did in
the last statement in late June. “Economic growth so far this
year has been considerably slower than the committee had
expected,” it said. The Fed also said it expects a “somewhat
slower pace of recovery over coming quarters,” adding that
“downside risks to the economic outlook have increased.”
Stocks erased gains and Treasuries rallied after the
statement. The Standard & Poor’s 500 Index fell 0.9 percent to
1,109.45 at 2:46 p.m. in New York after advancing as much as 2.9
percent. The yield on the two-year Treasury note fell to 0.17
percent.