Fed Stands Pat on Bond Buying

Officials Want to See More Evidence of Sustained Economic Recovery.

After spending months alerting the public that they could begin to wind down an $85 billion-a-month bond-buying program at their September policy meeting, Federal Reserve officials got cold feet Wednesday and decided to keep the purchases in place.

The reasons: An economy that has failed to live up to the Fed’s expectations for growth and a worry that a jump in long-term interest rates over the past several months could squeeze an already weak recovery.

“What we are going to do is the right thing for the economy,” Fed Chairman Ben Bernanke said at the post-statement press conference. Officials said in their policy statement that they “decided to await more evidence that [economic] progress will be sustained before adjusting the pace of purchases.”

The bond-buying program is the Fed’s signature response to a slow recovery. Its purchases of U.S. Treasury securities and mortgage bonds are meant to hold down long-term interest rates and push up the value of assets like stocks, and encourage spending, investing and growth.

Among the concerns about economic growth, the Fed in its statement highlighted higher mortgage rates, which have climbed more than a percentage point since May, when Fed Chairman Ben Bernanke first hinted the central bank could begin to scale back the bond-buying program. The Fed also said that federal fiscal policy is “restraining economic growth.”

More From The Wall Street Journal (subscription required):