WASHINGTON — The Federal Reserve postponed any retreat from its long-running stimulus campaign Wednesday, saying that it would continue to buy $85 billion a month in bonds to encourage job creation and economic growth.
As congressional Republicans and the White House hurtle toward another showdown over federal spending, the Fed said it was concerned that fiscal policy once again “is restraining economic growth,” threatening to undermine what the Fed had described just months ago as a recovery gaining strength.
Stock markets jumped after the 2 p.m. announcement, with the Standard & Poor’s 500 stock index touching a record high and the Dow Jones industrial average ahead more than 150 points.
The Fed’s decision also may reflect the consequences of yet another premature retreat from its own policies. Mortgage rates have climbed and other financial conditions have tightened since the Fed signaled in June that it intended to reduce its asset purchases by the end of the year, the Fed noted Wednesday.
“The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and the labor market,” it said in a statement released after a regular two-day meeting of its policymaking committee.
The decision, an apparent victory for the Fed’s chairman, Ben Bernanke, and his allies who have argued for the benefits of asset purchases, was supported by all but one member of the Federal Open Market Committee.
The Fed may still begin to reduce asset purchases by the end of the year, consistent with its previous statements. The Fed also refrained from any change in its stated intention to hold short-term interest rates near zero at least as long as the unemployment rate remains above 6.5 percent.