Fed to maintain economic stimulus program

WASHINGTON — The Federal Reserve, noting that economic growth had ‘‘paused’’ in recent months, said Wednesday it would continue its efforts to stimulate the economy for as long as it deemed necessary.

The Fed attributed the pause in growth to the impact of Hurricane Sandy and other ‘‘transitory factors,’’ saying there were some signs of increased strength in areas including consumer spending and housing.

It affirmed the stimulus program it announced in December, saying that it would hold short-term interest rates near zero at least until the unemployment rate fell below 6.5 percent and would expand its holdings of Treasury securities and mortgage-backed securities by $85 billion each month.


“The committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline,’’ the central bank said in a statement released after the conclusion of a two-day meeting of its policymaking committee.

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The decision was supported by 11 of the 12 members of the Federal Open Market Committee. Esther George, president of the Federal Reserve Bank of Kansas City, was the only dissenter, citing concerns about economic stability and inflation.

The Fed announcement came hours after the Commerce Department said the economy in the fourth quarter contracted by 0.1 percent, the first decline since 2009.

For the year, the economy grew by 2.2 percent — a decent pace in normal times but not fast enough to help the millions of Americans still unable to find work.

The central bank is trying to increase economic activity by holding down interest rates and reducing the availability of such safe assets as Treasury bonds, pushing investors to take larger risks and reducing borrowing costs for businesses and consumers.


Officials have pointed to increased sales of cars and homes as evidence that the policy is working, but they also have sought to temper expectations, warning in particular that monetary policy cannot offset reductions in government spending.

Indeed, the unemployment rate has not declined since the Fed launched its latest round of purchases in September. The rate was 7.8 percent in December, the same as four months before.

The government will report the rate for January on Friday.

Fed officials also are wrestling with the potential costs of further expanding the central bank’s vast investment portfolio.

Some critics warn that the Fed’s efforts will loosen its control over inflation, but those warnings so far have come to nothing. Inflation has actually fallen below the 2 percent annual pace that the Fed regards as healthy, leading some officials to argue the economy could use a little more inflation.