Wall Street Journal (09/17/14) Jon Hilsenrath
Following a two-day meeting, the U.S. Federal Reserve announced plans to end the bond-buying stimulus program after October and unveiled a new technical plan for how the central bank will raise short-term interest rates in 2015, after leaving the federal-funds rate near zero since December 2008. Some experts had thought the “considerable time” language in the central bank’s interest rate policies would be eliminated, but the Fed maintained the language, with officials stating that interest rates would remain low for a considerable time after the bond-buying program ends because the economy continues to face “significant underutilization of labor resources.”
The Fed’s updated projections, released quarterly, show policymakers expect the economy to expand at a pace consistently below 3% for the next three years. The central bank also said it would purchase $15 billion of mortgage and Treasury bonds in October and then stop its purchases, leaving the Fed holding a rather large portfolio that will shrink as the central bank raises interest rates. Officials affirmed their widely held view that rate increases will not happen until 2015.