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The Federal Reserve on Wednesday said it will keep buying bonds until it sees lower U.S. unemployment and higher inflation.
In a statement at the conclusion of its policy meeting, the central bank said it would buy at least $80 billion per month of Treasury bonds and $40 billion of agency mortgage-backed securities “until substantial forward progress has been made toward the FOMC’s maximum employment and price stability goals.”
The Fed did not change its program to expand its purchases of more longer-dated paper and less shorter-date paper, known as a “twist,” as some economists and traders had anticipated.
With its policy interest rates pinned at zero, changes in asset purchases are main monetary policy tool for Fed officials.
“These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses,” the Fed statement said.
Read: The entire Fed statement
With the new guidance, the Fed is hoping that the market won’t expect an end to the bond-buying for the medium term.
Fed officials said again they expect to leave interest rates pinned near zero through the end of 2023. Only 5 of the Fed officials expect an earlier rate hike.
In their statement, the Fed said that the economy was facing a “challenging” time.
The latest data show the economy is slowing given the surge in COVID-19 cases across the country.
At the same time, there is a sense that things will improve as the vaccines become widely available by next summer.
Congress on Wednesday was still working on details of another fiscal stimulus package.
Yields on 10-year Treasury TMUBMUSD10Y, 0.913% has remained below 1% even with slightly more optimism about the longer-run outlook.
Fed Chairman Jerome Powell will hold a press conference starting at 2:30 p.m. Eastern.
Stocks sank after of the Fed statement was released with the Dow Jones Industrial Average DJIA, -0.03% down about 100 points.
