So, for your convenience and hopefully enjoyment, I decided to take a stab at breaking it down into common English for you. My commentary is bolded.
Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.
Here, the Fed is more or less saying that our economy is, in fact, getting better, but only in a kinda-sorta way. Our unemployment rate still shows that too many people are out of work, and prices aren’t rising too much.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest 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 over coming quarters, inflation will run at levels at or below those consistent with the Committee’s dual mandate.
This is very similar language from the last release from the Federal Reserve. Remember – the Fed is required BY LAW to balance inflation (prices) with employment (jobs). Since jobs are low, the Fed will continue to pump out money into the economy and worry less about inflation, which they say is a non-issue, in order to create jobs.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today 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 late 2014.
So, this is what people are talking about. The Fed announced that short-term rates will essentially remain at zero percent until 2014. Investors in bonds jumped for joy and gobbled up more bonds, which led to a decrease in rates. Hooray!
The Committee also decided 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 to promote a stronger economic recovery in a context of price stability.
The Fed will keep buying mortgage bonds, which, in turn, will try to keep mortgage rates low. However, it can’t be guaranteed that we will enjoy these rates until 2014 because of the different variables that go into determining mortgage rates.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.
The board was in total agreement here, except for the lone ranger Jeffrey Lacker, who voted against it. His rationale for his opposition against keeping interest rates at zero percent was solely based upon the time frame of keeping rates so low.
So there you have it, people. Isn’t this easier to understand than the actual release? Maybe I should apply to be the release writer guy for the Federal Reserve, that way 95 percent of the country will actually understand what they’re saying.
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