It was three years ago when the Fed first slashed the federal funds rate to near zero. In today's meeting, the Fed continues to hold the rate to near zero. As expected, there were no policy changes or new stimulus.
The Fed did upgrade some of its language recognizing improvements to the economy. For example, in today's press release it stated that the "economy has been expanding moderately". As a comparison, in the November statement it said that "economic growth strengthened somewhat in the third quarter". However, the Fed still says "unemployment rate remains elevated" and "longer-term inflation expectations have remained stable". In addition, it warns that "global financial markets continue to pose significant downside risks." In short, there are no signs that the Fed may change its mid-2013 pledge which it reiterated again today:
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.
There had been speculation that the Fed was planning to provide more transparency of the probable path for the Fed funds rate. There were no signs of that today. Perhaps we'll see some signs of this in their next meeting in January.
One last interesting thing to note about the FOMC statement today was that there was one dissenting vote. It was the same as the last meeting with Charles Evans wanting to see more policy accommodation.
Finally, don't be too tough on Bernanke. Today happens to be his 58th birthday.
Effects to Deposit Account Rates?
With no new policy accommodation announced today, we shouldn't see a new wave of rate cuts at banks like we saw after the Fed's mid-2013 pledge when several banks cut savings account rates and CD rates. However, I wouldn't be surprised to see the continuation of a trickling of rate cuts like we have seen for most of this year. Until we see signs that the Fed is getting ready to tighten, I doubt we'll see much improvements in deposit rates.
Future FOMC Meetings
The next three meetings are scheduled for January 24-25, March 13 and April 24-25.