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Federal releases can be kind of confusing and difficult to understand.  Chock full of big words and borderline run-on sentences, it can be very intimidating for the average reader to peruse.

So, for your convenience and hopeful enjoyment, I decided to take a stab at breaking it down into common English for you.  My commentary is in bold.

Release Date: December 13, 2011

For immediate release

Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.

Yay!  The economy is expanding moderately!  That’s exciting!  Thrilling!  Right…  In other words, the economy is kinda-sorta getting better.  The rest of the paragraph was like past announcements:  unemployment is getting a bit better, but still stinks, people are spending more but businesses not so much, and housing prices still aren’t improving.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

The Fed says here that they are still worried.  They think unemployment is going to come down – but slowly.  They are also wringing their hands over the situation in Europe.  The Fed also thinks that prices won’t rise much in the future (I guess they haven’t seen the prices of peanut butter lately!  Mmmm…  Peanut butter…)

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Fed mentioned their “dual mandate” twice in this press release.  What they are getting at is that the Federal Reserve is required, by law, to balance two things:  1) Prices and 2) Jobs.   They also mention that they will keep on reinvesting money back into mortgages.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The markets thought the Fed might announce some new stimulus this time.  Maybe they would announce that they would shoot hundred dollar bills out of a cannon or something…  The Fed didn’t announce anything new though.  Stock investors had hoped the Fed would shoot money out of a cannon – so they sold stocks when nothing happened.  Bond investors thought the same thing – so they were happy when the Fed didn’t shoot money out of a cannon (which would have been bad for bonds), so bond prices went up (which makes interest rates go down).

The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.

The Fed says they will keep watching their economy and doing their job.  Thanks Fed!

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.

The committee was not in total agreement.

Eric Mally is a writer for Quicken Loans, a company whose clients believe it’s Engineered to Amaze.  Interested in being Amazed by us? Read trusted reviews at Quicken Loans Reviews and at Epinions.

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