The Federal Open Market Committee reported that since it met in September economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months.

Business investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the FOMC decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The FOMC is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The FOMC will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The FOMC also decided to keep the target range for the federal funds rate at 0.0% to 0.25% and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

Consistent with its statutory mandate, the FOMC seeks to foster maximum employment and price stability. The FOMC continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the FOMC judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The FOMC also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the FOMC’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the FOMC will continue to pay close attention to the evolution of inflation and inflation expectations.

To read the full FOMC news release click here.