The U.S. economy continues to expand at a moderate pace despite the "temporary" impact of higher energy prices, the Federal Reserve announced in making its latest decision on interest rates Wednesday.
There were no major shifts in the Fed's accommodative monetary policy, but an assessment of the outlook on interest rates showed members in a somewhat more hawkish state of mind.
With the economy plodding along, the Federal Open Market Committee once again refrained from a third round of quantitative easing. Voting members also elected to not extend Operation Twist -- the Fed's sale of medium-term bonds to buy longer-term bonds -- past its expiration in June.
The decision to keep its benchmark rate at effectively zero was in line with economist expectations. The Fed did not budge from its conditional pledge to keep rates at historic lows until late 2014.
The latest CNBC Fed survey showed only one-third of economists, fund managers, and strategists expect additional QE in the next twelve months. An even smaller percentage think policy makers will extend Operation Twist beyond June.
Richmond Fed President offered the lone dissenting vote for a third straight meeting, insisting that rates will need to be raised in order to fulfill the Fed's obligation to promote price stability.
For now, inflation pressures remain subdued, according to the rate-setting board.
"Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable," the Fed's statement read. "The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily."
The "depressed" housing market remains an area of concern for the Fed, but policy makers saw further improvement in labor market conditions despite unemployment at 8.2 percent.
Strains in global financial markets continue to pose significant downside risks to the economic outlook, Chairman Ben Bernanke and his colleagues warned.
Seven of the 17 members of the Fed see the first rate hike coming in 2014, while no members are forecasting that the first rate hike will come until 2016. At the Fed's previous meeting, two members predicted that rates would stay at zero until 2016.
The Fed reduced 2012 jobless view to 7.8 percent to 8 percent, and now projects the economy will grow between 2.4 percent and 2.9 percent annually in 2012, according to its monetary policy outlook.
In January, the Fed predicted the jobless rate would range between 8.2 percent and 8.5 percent, and the economy would grow at a slightly slower pace.
At a press conference in Washington, Bernanke assured that all policy tools remain at the Fed's disposal, but analysts say the Fed's more optimistic outlook takes additional asset purchases off the table barring a turn for the worse for the economy.
by RTT Staff Writer
For comments and feedback: email@example.com
What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.