WASHINGTON (10/29/14, UPDATED 2:25 p.m. ET)--As expected, the Federal Open Market Committee (FOMC) announced at the end of its two-day policy meeting today that it will not purchase bonds next month for the first time in more than three years.
The Federal Reserve's monetary policy-making body believes that the economy has strengthened enough that it no longer needs that accommodative policy tool, which has injected more than $1.6 trillion into the lending market since the practice began.
"The committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability," the Fed said in its statement. "Accordingly, the committee decided to conclude its asset purchase program this month."
But as the economy has gained steam in recent months, bolstered by solid job gains, a lower unemployment rate, moderately rising household spending and advances in business fixed investment, the FOMC still contends that because of sluggish inflation, in addition to a slow recovery in the housing market, it will wait a "considerable time" before raising short-term interest rates.
The Fed has kept interest rates pinned near 0% in recent years to lower the cost of lending nationwide.
"It likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset-purchase program this month, especially if projected inflation continues to run below the committee's 2% longer run goal, and provided that longer-term inflation expectations remain well anchored," the FOMC said.
Further, even after inflation rises to the levels that the FOMC would like to see, the Fed said that it anticipates it will have to hold rates below levels it deems normal in the longer run for some time.
The FOMC's next policy meeting falls on Dec. 16-17.