The Fed also plans to expand its purchase of agency mortgage-backed securities by up to $750 billion, elevating its total possible investment in these securities to $1.25 trillion this year. It also plans to increase the size of its potential purchase of Fannie Mae and Freddie Mac debt to a maximum of $200 billion, from $100 billion.
The committee said that, since it last convened in January, the US economy continued to contract, with indicators pointing to further weakness in the housing, labour and credit markets, and lacklustre consumer spending.
By setting the federal funds target rate at an all-time low of 0-25 basis points last December, the Fed has exhausted traditional methods of stimulating the economy.
In an effort to quell fears that the Fed's ballooning balance sheet, coupled with its multiple stimulus packages, will lead to elevated future inflation rates, the Fed stated that "the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."
The Fed also maintained its target range for US interest rates between 0-25bp, explaining that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time".