The Federal Reserve Release in Common English

Federal Reserve Release in Common English - Quicken Loans Zing Blog Federal releases can be kind of confusing and difficult to understand. Chock full of big words and borderline run-on sentences, they can be very intimidating for the average reader to peruse.

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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12 Responses to The Federal Reserve Release in Common English

  1. veracity January 26, 2012 at 7:23 pm #

    I don’t know about anyone else, but I don’t see what was necessary to “break down” into “common English”. I actually find the whole attempt insulting to Americans in general. Those of us that pay attention usually have a pretty good understanding of big words and borderline run-on sentences. Instead of caring about what BS the Fed is spewing (since it’s all by their design anyway) how ’bout we just END THE FED?!

    Ron Paul 2012

    Liberty lies in the hearts of men and women, when it dies there no court, no law, no Constitution can save it.

    Wake up America, it’s TIME!!

  2. Richard nathan January 26, 2012 at 7:56 pm #

    Where are the best commercial property
    Rates in the us.

  3. Denise Giazzon January 26, 2012 at 8:34 pm #

    Thank you for clarifying this for me
    I was wondering if o should ask to get my loan down from 6% before 2014?

  4. Duda January 26, 2012 at 9:14 pm #

    So to put it even simpler, the Fed is preparing for the next depression already before we’re even done with this one.

  5. dave roth January 26, 2012 at 10:32 pm #

    THERE IS NO WAY WE CANNOT KEEP PRINTING MONEY AND NOT CAUSE INFLATION. ANY ECONOMICS PROFESSOR WILL TELL YOU THIS. I IS INFLATION OR COMPLETE COLLAPSE OF OUR GOVERNMENT.

  6. Victoria Araj January 27, 2012 at 10:41 am #

    Hi, thanks for reaching out to Quicken Loans. We only lend on homes not commercial property, so unfortunately we don’t have any information we can share about commercial property rates. But in the future, if you are ever in need of a home loan we’d be glad to help you out!

  7. Victoria Araj January 27, 2012 at 10:42 am #

    Hi Denise, We will have one of our home loan experts contact you to see what we can put together for you and what makes the most sense for your situation. Thanks for reaching out to Quicken Loans and have a great weekend!

  8. Addile Martin January 27, 2012 at 4:49 pm #

    Did the Feds Open HARP to condominiums?

  9. Clayton Closson January 27, 2012 at 4:58 pm #

    Hi Addile

    Yes, HARP should be available on condos. Gaby (who writes for this blog) is currently refinancing a condo through HARP. They may be some restrictions, but it should be availalbe through your mortgage servicer.

  10. Jimpop January 27, 2012 at 9:46 pm #

    Gee whiz, Veracity, so sorry if your self inflicted sensibilities have been insulted.
    And thanks too for taking up for us poor, apparently uninformed “americans in general” who don’t pay attention like you do! And please, if you respond to this, don’t use any BIG words will ya…they scare us less intellectually fortunate types.
    Oh, and do us all a favor and continue to lick the the bootstraps of the losers.

  11. Brian Warren January 28, 2012 at 8:36 am #

    Are they doing refinancing for homes with PMI?

  12. rocco bobaduccio January 28, 2012 at 12:10 pm #

    I still don’t get it!

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