Washington: Federal Reserve policymakers on Wednesday cut their monthly bond-buying stimulus program by another $10 billion (Dh36.7 billion) and held interest rates steady at near zero, offering no suggestions that they will raise them any time soon as the economic recovery improves.

In a statement after a two-day meeting, the Federal Open Market Committee said it expected that interest rates would remain at their rock-bottom level for “a considerable time” after the bond-buying programme ends. The programme is on track to conclude in October.

The Fed also downgraded its economic projections for this year and 2015 from estimates made in June. The Fed now forecasts the economy will grow between 2 per cent and 2.2 per cent this year compared with a June forecast of 2.1 per cent to 2.3 per cent.

In 2015, the Fed forecasts the economy will expand between 2.6 per cent and 3 per cent. In June, the 2015 forecast was for growth between 3 per cent and 3.2 per cent.

Despite those projections, the Fed thinks the unemployment rate will fall faster than it forecast in June. The rate now could go as low as 5.9 per cent by the end of this year and 5.4 per cent in 2015.

Some Fed officials, concerned about inflation, have been pushing to signal that interest rates could rise sooner. And two committee members dissented on Wednesday’s statement out of frustration that the so-called forward guidance on interest rate hikes was not loosened.

Only one committee member dissented to the June statement.

Economic progress

Richard Fisher, president of the Federal Reserve Bank of Dallas, dissented because he believed continued improvement in the economy and labour market “likely warrant an earlier reduction in monetary accommodation than is suggested by the committee’s forward guidance”.

Charles Plosser, president of the Federal Reserve Bank of Philadelphia, dissented in June and did so again Wednesday for the same reason. He said the Fed’s guidance was “time dependent and does not reflect the considerable economic progress that has been made toward the committee’s goals.”

Most committee members forecast that the Fed would raise interest rates next year.

Inflation continues to run below the Fed’s annual target of 2 per cent. The Labour Department reported Wednesday that consumer prices fell 0.2 per cent last month, the first drop since April 2013.

For the year ended in August, the Consumer Price Index rose 1.7 per cent. The news, along with a slowing of job growth during the summer, reduced pressure on Fed officials to raise interest rates.

Still, the unemployment rate has dropped sharply over the last two years and the economic recovery has strengthened. Given those improvements, the Fed on Wednesday decided to continue reducing its bond-buying stimulus programme.

Balance sheet

The Fed began the program in September 2012, purchasing $85 billion a month in Treasury and mortgage-backed securities to try to lower long-term interest rates and stimulate economic growth.

The programme — the third round of so-called quantitative easing — along with other stimulus efforts have caused the Fed’s balance sheet to more than quadruple to $4.4 trillion since 2008.

Fed policymakers decided in December 2013 to start tapering the purchases. Beginning in January, the Fed has voted to reduce the purchases by $10 billion a month at each of its meetings this year.

Wednesday’s decision means the Fed will purchase $15 billion in bonds next month, when it is expected to vote to end the programme.