WASHINGTON (6/18/14 UPDATED p.m. 2:35 p.m. ET)--All along, the Federal Open Market Committee (FOMC) has said tapering its monthly bond-purchasing program is not on a set course, but despite a weak first quarter for the U.S. economy, the committee announced today it will continue to reduce its quantitative easing (QE) program by $10 billion.
The announcement came at the conclusion of the FOMC's two-day policy meeting this week.
The committee added that if the labor market continues its upward trend and if inflation continues to rise closer to the FOMC's longer-run objective of 2%, it will likely again taper asset purchases at its next policy meeting.
"The committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially," the FOMC said.
The Federal Reserve's monetary policy-making body has been shaving down the amount of bonds and securities it has been buying over the last few months--purchases that have injected much-needed cash into the lending industry and subsequently the economy--by $10 billion every month.
With this most recent reduction, the Federal Reserve will purchase agency mortgage-backed securities at a rate of $15 billion per month, and Treasury securities at $20 billion per month.
Once the program sunsets, the committee must then turn to the decision of when, and by how much it should raise short-term interest rates that concurrently have helped lift up lending over the past few years.
FOMC members said in the statement that it will be appropriate to hold down the federal funds rate at near-zero levels for quite a while after the asset purchase program ends, especially if inflation fails to reach the committee's preferred 2% goal.
"The committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the committee views as normal in the long run," the committee said.
The committee also must craft a plan to disperse the trillions of dollars it has amassed through the bond-buying program. Though, the committee appears comfortable with its balance sheet for now, as it also said that its holdings of longer-term securities will help maintain downward pressure on interest rates, support mortgage markets, and help make broader financial conditions more accommodative.
"In turn (this) should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the committee's dual mandate," the committee said.
The FOMC hosts eight policy-making meetings every year. The next meeting will take place July 29-30. Meeting minutes are released three weeks after the conclusion of a meeting.