"Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth."
Now, we also know that to bolster the U.S. economy, the Federal Reserve has spent $85 billion in stimulus measures every month, purchasing a mix of Treasury bonds and mortgage-backed securities. It has also worked to keep interest rates low, in an attempt to encourage borrowing by businesses and households. What the market-men probably missed is a series of statement which does not point towards a sudden cut in the bond buying programme. Let us examine a few of them.
"In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal."
(iii) Bernanke also said the committee could taper off its purchase of securities later this year, echoing a statement he made last month. But he added that the Fed would still hold the securities it has purchased. And here's the part about the monthly purchase of securities:
"To help support a stronger economy... the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month."
In general, the Fed's projections for the U.S. economy were more optimistic than in recent sessions, with policymakers saying they see reduced risks since last fall. This changed sentiment has led many investors to believe the central bank will indeed begin to ease its pressure to keep interest rates low.