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Economy in Brief

FOMC Will Continue to Provide Abundant Liquidity to the Economy
by Tom Moeller  July 31, 2013

As expected, the Federal Open Market Committee today left the Federal funds rate in a range from 0 to 1/4 percent. The Fed funds rate has remained unchanged since late-2008 at its lowest level ever. The discount rate was left at 0.75%. Little-changed were the Fed's comments on the economy.

Financial liquidity will remain abundant. "The Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability."

"The Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens."

With respect to economic activity, the Fed stated that it "expanded at a modest pace during the first half of the year. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen somewhat and fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable."

As for the outlook and risks, "The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term."

The press release for today's FOMC meeting can be found here.

Haver's SURVEYS database contains the projections from the Federal Reserve Board. The economic data can be found in Haver's USECON database.

  Current Last 2012 2011 2010 2009
Federal Funds Rate, % (Target) 0.00-0.25 0.00-0.25 0.14 0.10 0.17 0.16
Discount Rate, % 0.75 0.75 0.75 0.75 0.72 0.50
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