Asset purchases are being deployed to add near-term momentum to the economy. After those purchases are eventually completed, the purchased assets will remain on the Fed’s balance sheet for some time and continue to put downward pressure on rates. The Committee will continue to use interest rate policy, including forward guidance about short-term rates, as we return to full employment.
Provided inflation remains in check, the Committee will begin to assess whether to increase short-term rates when unemployment reaches 6.5 percent. Two important considerations are likely to arise at that time. First, if inflation remains low, as expected, that would be a signal that there is still significant slack in the economy.