Annnnnnd we’re back with another Federal Open Market Committee (FOMC) release broken down into common English for you.
Doesn’t it seem like it was yesterday when I was breaking down the last release for you all?
Did you miss me and my feeble attempts to drive some humor into the FOMC release? I’m sure you recall the Wayne’s World references from last time, right?
At any rate, the Fed met again this week to discuss the current state of the economy. It’s a lot of the same stuff from last time, but important nonetheless.
Are you ready to learn more about the present state of the economy??
My commentary is conveniently bolded for you below.
Information received since the Federal Open Market Committee met in March suggests that the economy has been expanding moderately. Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.
So pretty much this is the same opening as the other Fed releases in the previous months. What they’re saying is, yet again, the economy is only kinda-sorta getting better. Jobs are kinda-sorta coming back but unemployment is still higher than they’d want. They also let us know that gas prices have risen. Wait…what’s that?? Gas prices are up?!? I had no idea!!
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its
The Fed is still optimistic that our economy is getting better. The unemployment rate is expected to decrease slowly, but the fact of the matter is that our friends across the pond in Europe make the Fed a little uneasy. It’s kind of like trying to eat a pint of ice cream by yourself – you know that it will go down smoothly, but your stomach is going to feel a little queasy afterward knowing that the future might be a little…um…messy?
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its 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.
The good news out of this chunk is that the Fed plans to keep interest rates near zero percent until at least 2014. Like my main man Rusty Ryan said in Ocean’s Eleven, “Don’t use seven words when four will do,” Fed!
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 is going to keep on twisting like they did last summer…er last September. I’m 25-years old and dropped a Chubby Checker reference. Yeah, I dig oldies. So what? If you’re older than me and didn’t catch on, I suggest you listen to your local oldies radio station.
“Operation Twist” will stay in effect, meaning the Fed will keep taking cash out of short-term bonds and use it to buy longer-term bonds to drive long-term rates down. The goal is to put money in people’s pockets so they can go out and spend it (probably mostly on gas).
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 does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.
With the shocker of the day, Jeffery Lacker didn’t agree with the rest of his Fed cohorts. I say “shocker” with the utmost sense of sarcasm – this marks the third FOMC meeting where Lacker went against the grain. He still feels that rates should not be this low until 2014.
So, that’s that. The Fed will keep interest rates down, the economy is slowly but surely getting better, gas is up, the Fed will keep on twistin’, Lacker still disagrees, and Europe is making everyone worried.
All in a day’s work.
Tune in next time when I try to keep my streak of tying movie quotes into FOMC releases alive!