After a two-day policy meeting, the US Federal Reserve said it would continue to buy USD 85 billion a month worth of bonds. The Fed said it would do so to encourage borrowing and spending and keep interest rates low. The central bank added that it would keep short-term interest rates close to zero for as long as the rate of unemployment would remain above 6.5% and the inflation forecast would be mild.
Although the agency said the government's budget policies reduced economic growth, it did not say anything about the shutdown. Only Kansas City Federal Reserve Bank President Esther George dissented against the Fed's policy decision, an Associated Press report said.
Last month, financial markets were surprised at the decision of the Federal Open Market Committee decided to continue its bond buying program. The FOMC said it wanted to see evidence of progress before reducing its bond purchases. The Fed then announced that it would still buy USD 40 billion worth of mortgage-backed securities each month and USD 45 billion worth of longer-term Treasury securities. According to a Forbes report, traders had earlier expected that the central bank would taper its bond purchases by as much as USD 10 billion a month.
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