Global| Sep 18 2013FOMC Elects to Hold Posture of Abundant Liquidity Provision
by:Tom Moeller
|in:Economy in Brief
Summary
It's too soon to reduce the large doses of liquidity being provided to the economy, concluded the Fed in its announcement following today's meeting of the Federal Open Market Committee. "The Committee sees the improvement in economic [...]
It's too soon to reduce the large doses of liquidity being provided to the economy, concluded the Fed in its announcement following today's meeting of the Federal Open Market Committee. "The Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases."
And the size of the "quantitative easing" will remain unchanged. "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."
Qualifiers accompanied the comments regarding economic activity. The Fed stated that "Some indicators of labor market conditions have shown further improvement in recent months, 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 further and fiscal policy is restraining economic growth." As such, the FOMC 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%.
As for price inflation, "Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable."
When will the abundant provision of liquidity be scaled back? "The Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."
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 | 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 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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