WASHINGTON — Federal Reserve officials kept their plan to buy $600 billion worth of Treasuries through June, maintaining an expansion of record stimulus amid criticism from top Republican lawmakers.
The purchases will "promote a stronger pace of economic recovery" and keep prices stable "over time," the Federal Open Market Committee said in a statement Tuesday in Washington. Unemployment is too high, the central bank said, as it repeated its pledge to leave the benchmark interest rate low for an "extended period."
Chairman Ben Bernanke is bucking the most intense disapproval of monetary policy in three decades by sticking with efforts to boost growth that's been too slow to reduce joblessness persisting near a 26-year high. Gains in manufacturing, retail sales and inflation expectations indicate asset purchases may be helping to spur the economy. The strengthening dollar has defied critics who said the policy would weaken the currency.
"The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment," the Fed statement said. "Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit."
Fed officials left their target for the federal funds rate, which covers overnight interbank loans, in a range of zero to 0.25 percent, marking two years of the policy. The central bank is likely to wait until the first quarter of 2012 to raise the rate, based on the median estimate in a Dec. 2-8 Bloomberg News survey of economists.
"Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate," the Fed said, repeating last month's statement. Some Republican lawmakers want to jettison the half of the Fed's legislative mandate that focuses on maximum employment so as to concentrate on stable prices alone.
"Measures of underlying inflation have continued to trend downward," the statement said.
Kansas City Fed President Thomas Hoenig, the longest- serving policy maker, voted against the FOMC decision for the eighth straight time, reiterating his view that the "continued high level of monetary accommodation" may eventually "destabilize the economy." He tied former Governor Henry Wallich's record in 1980 for most dissents in one year.
The $600 billion of purchases are in addition to long-term Treasuries the Fed is buying by reinvesting proceeds from maturing mortgage debt, a policy begun in August. Combined purchases through June will total $850 billion to $900 billion, or about $110 billion a month, the Fed said Nov. 3. Policy makers reiterated they will "regularly review" the purchase program and adjust it as needed.
The central bank has bought $114.1 billion of Treasuries since Nov. 12, when it began purchases under the program dubbed QE2 for the second round of so-called quantitative easing. The Fed bought $1.7 trillion of mortgage debt and Treasuries in the first round through March 2010.
Thirty-eight of 39 analysts in a Bloomberg News survey taken Dec. 7-8 forecast the Fed would leave its bond-buying program unchanged. Eight of 37 said the Fed would ultimately buy more than the $600 billion planned through June, and two said it would buy less.
Some data point to the recovery gaining strength in the six quarter since the end of the worst recession in seven decades. Sales at retailers last month rose more than forecast, a government report showed Tuesday. Manufacturing expanded for a 16th consecutive month in November, and a measure of consumer confidence increased in December to a six-month high.
The global economy is in a "clear" recovery that is boosting confidence in the trucking industry, Richard Giromini, chief executive officer of truck maker Wabash National Corp., said.
At the same time, employment remains stalled. Payrolls expanded by 39,000 jobs in November, and the jobless rate jumped to 9.8 percent from 9.6 percent, compared with the median analyst forecasts for an addition of 150,000 and no change in an unemployment rate that has stayed at 9.4 percent or higher since May 2009.
In 2008, people "would have called you a lunatic" if you said U.S. interest rates would be at zero for two years, said Paul Dales, U.S. economist at Capital Economics in Toronto. Now, "it's not too hard to see doing it for another two years."