WASHINGTON — Federal Reserve officials signaled for the first time on Tuesday that they are worried that the slow-moving recovery could be undermined by very low rates of inflation and hinted that they might resume buying vast amounts of government debt.Read the rest here.
While the central bank’s Federal Open Market Committee did not take any new steps on interest rates, it communicated in unmistakable terms its concerns about the fragility of the economic recovery and the threat to stable prices.
It said inflation levels were “somewhat below those the committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.” And it said it was “prepared to provide additional accommodation if needed” to support the recovery and get inflation back to normal.
The Fed will continue to use money from its holdings of mortgage-related bonds to buy long-term Treasury debt, the tactic it announced on Aug. 10. That strategy was intended to prevent a slight tightening of monetary policy that would have occurred as the bonds held by the Fed were paid off and money was taken out of the economy.
Following the announcement the stock market is trading mixed and near flat. The bond market is rallying across the curve with Treasury yields dropping. Precious metals are up on renewed fears of inflation and currency debasement. Gold is currently trading at 1288.20 oz. (up $8.70), a new nominal record high. Silver is up more than 1.20% and is trading at a multi-year high of $21.00 oz.