Fed to maintain its bond-buying pace each month

Washington - The Federal Reserve said persistently low inflation could hamper the economic expansion and pledged to keep buying $85 billion in bonds every month.

"The committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term," the Federal Open Market Committee said Wednesday at the conclusion of a two-day meeting in Washington.

Chairman Ben Bernanke and his colleagues are debating when employment gains will be sufficient to warrant tapering bond buying that has swelled the Fed's balance sheet to a record $3.57 trillion. Some policymakers have said the purchases, aimed at fueling growth and reducing unemployment, risk creating asset-price bubbles.

The statement contained no new language on the conditions for maintaining the pace of asset purchases. The Fed repeated the pledge it has used since September that it will continue purchases until the labor market outlook has improved substantially.

Price increases have stayed below the central bank's 2 percent target for more than a year. Bernanke told lawmakers July 17 that low inflation poses a risk to the economy, and policy makers "will act as needed" to ensure it rises toward their goal.

St. Louis Fed President James Bullard dissented from the previous Fed statement, saying the committee should "signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings."

The statement's new language on the risks of too-low inflation language may have been included in part to satisfy Bullard's concerns after his dissent at the previous meeting, said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, N.C.

They also left unchanged their commitment to hold the interest rate near zero as long as the jobless rate remains above 6.5 percent and the outlook for inflation doesn't exceed 2.5 percent.


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