We've Changed the Guideposts but not our methods

The US Federal Reserve on Wednesday said it could keep interest rates unusually low even after the US job market returns to full strength and inflation rises to the central bank's target.

Unsure it's a good Idea

In announcing its view on future rates after a two-day policy meeting, it also dropped a set of guideposts it was using to help the public anticipate when it would finally start bumping overnight borrowing costs up from zero.

It said, however, that dropping a promise to hold rates steady "well past the time" the US unemployment rate falls below 6.5 percent did not indicate any change in its policy intentions. Rather than relying on unemployment and inflation thresholds to guide expectations, it said would lean on a wide range of economic indicators in making its decision.

But what stood out in the central bank's statement was its embrace of easy money policies even after the Fed achieves its goals of full employment and 2 percent inflation.

U.S. stock prices fell after the statement was released, while yields on U.S. government debt rose.

The central bank also proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.

Minneapolis Fed President Narayana Kocherlakota dissented, saying that dropping the threshold could hurt the credibility of the Fed's commitment to return inflation to 2 percent.