Fed sticks to QE3 plan to buy mortgage securities (by Steve Goldstein)

WASHINGTON (MarketWatch) -- The Federal Reserve on Wednesday opted to continue its program of buying $40 billion in mortgage-backed securities each month until the labor market improves "substantially" as the central bank repeated that the "unemployment rate remains elevated." The Fed, in an 11-to-1 vote, also maintained its Operation Twist program of swapping $45 billion securities of short-term securities into longer-term Treasurys, kept its interest rate target between 0% and 0.25%, said it expected exceptionally low levels of interest rates through mid-2015 and said highly accommodative policy should continue even after the economic recovery strengthens. While noting that household spending has "advanced a bit more quickly," the Fed said business investment has slowed and noted that housing has improved from "a depressed level." The Fed changed its description on inflation to "recently picked up" from "subdued," which it blamed on commodity prices, though the Fed said inflation expectations remain stable. Richmond Fed President Jeffrey Lacker continued to oppose the decision to buy assets and also the description of how long the Fed should keep rates low.