Fed Resists Further Asset Purchases, Maintains Mid-2013 Low Rate Pledge

The Federal Reserve on Wednesday vowed to hold interest rates at effectively zero until mid-2013. Even with Europe on the verge of a potentially catastrophic break-up brought on by an inability to stem its sovereign debt problems, the Fed refrained from committing to another round of large-scale asset purchases. However, policy makers set the table for future quantitative easing if the economic recovery proceeds at an anemic pace or fizzles out completely. "Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year," a statement from the Fed read. "Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated," policy makers noted. Charles Evans dissented, insisting that the economy needs to be jump-started by further asset purchases. The three dissenting voters from the previous two meetings went along with this month's decision. The U.S. economy grew at a 2.5 percent annual pace in the third quarter, following the second quarter's 1.3 percent gain. The Fed said it is prepared to employ remaining "tools to promote a stronger economic recovery in a context of price stability." The FOMC pointed out that household spending has increased at a somewhat faster pace in recent months, and that inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable, according to the Fed. Jobs figures released this morning suggest that the labor market is improving incrementally, but too slow to put a dent in an unemployment rate hovering above 9 percent. ADP said private sector employment increased by 110,000 jobs in October following an upwardly revised increase of 116,000 jobs in September. Recent measures to support the economy have made Fed Chairman Ben Bernanke the target of conservatives who say that the central bank risks sparking runaway inflation. On the eve of the Fed's September meeting, GOP leaders penned a letter to Bernanke "resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people." Bernanke and company responded by easing monetary further via Operation Twist -- selling $400 billion in short-term Treasuries in exchange for the same amount of longer-term bonds. The Fed chief will hold his quarterly post-decision press conference at 2:15 pm ET.