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Economy in Brief

FOMC Pares Back the Rate of Liquidity Provision
by Tom Moeller  January 29, 2014

At today's meeting of the Federal Open Market Committee, the Fed "decided to make a further measured reduction in the pace of its asset purchases. Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month."

The Federal funds rate was left unchanged in a range of 0.00% - 0.25% and the discount rate remained at 0.75%.

"The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored."

Regarding the economy, it has "picked up in recent quarters. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing."

"Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable."

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

Haver's SURVEYS database contains the projections from the Federal Reserve Board.

  Current Last 2013 2012 2011 2010
Federal Funds Rate, % (Target) 0.00-0.25 0.00-0.25 0.11 0.14 0.10 0.17
Discount Rate, % 0.75 0.75 0.75 0.75 0.75 0.72
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