No. The Fed aims to maintain interest rate low in order to promote economic activity. However, promoting economic activity is not the only mandate that the Fed has. Indeed, today statement from the Federal Open Market Committee (FOMC) clearly spells the Fed’s mandates: "foster maximum employment and price stability." The price stability mandate is important in the context of today FOMC statement, because if price stability is in jeopardy then the Fed would be forced to act by increasing the interest rate in order to reduce aggregate demand, and thus reduce inflationary pressures. Therefore, it would be not credible an unconditional commitment by the Fed to keep the federal funds rate at "exceptionally low levels” until mid-2013. As a matter of fact, the Fed did not make such unconditional commitment. The Fed expects to keep the federal funds rate at low levels as long as economic conditions permit so. Furthermore, the FOMC clearly states the economic conditions that warrant exceptionally low levels for the federal funds rate: "low rates of resource utilization and a subdued outlook for inflation over the medium run," among others. On the other hand, the Fed does not commit to keep the rate between 0-25 points either. That is, the statement refers to "exceptionally low levels," but what does it mean, maintain the current target between 0-25 basis points? For instance, over the 31 year-period from 1970-2000, the federal funds rate reached its minimum at 225 basis points and its maximum at 2,236 basis points. In sum, today FOMC statement is not only clearly conditional, but also vague regarding the rate level.
