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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Only Small Changes in FOMC Statement and Economic Projections


Only Small Changes in FOMC Statement and Economic Projections

The second FOMC meeting of the year finished this afternoon. In addition to a statement, the Fed released its economic projections, and Chairman Bernanke gave a briefing to the press. As expected, no policy changes were announced. In fact, the statement was very close to the January statement. There were just some minor changes to the FOMC’s view of the economy. One example is a slightly stronger view of job growth:

from January:

Employment has continued to expand at a moderate pace but the unemployment rate remains elevated.

from today:

Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated.

Another small change was the addition of fiscal policy risks:

from January:

Household spending and business fixed investment advanced, and the housing sector has shown further improvement.

from today:

Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive.

Most everything else in the FOMC statement remained the same. Just like in January, only Esther George dissented in the vote. The statement provided the reason for her dissent:

who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

Economic Projections

In the economic projections, the Fed slightly reduced its forecast for 2013 GDP growth and inflation growth. The forecast for the 2013 unemployment rate improved slightly with the upper range of the unemployment rate forecast falling from 7.7% to 7.5%.

With slow growth and an elevated unemployment rate, we should expect a long wait before we see higher rates. A large majority on the Fed (14 out of 19) still don’t see any policy firming before 2015.

Press Conference

After Chairman Bernanke’s opening remarks, he took several questions from the reporters. One common theme in his answers was that he and the FOMC will need to see a sustained improvement for several months in the economy and in the unemployment rate before any policy firming will take place. So it’s clear savers have a long wait for higher rates.

One interesting question came from a NYT reporter who asked Chairman Bernanke when was the last time he spoke with someone who’s unemployed. This seemed to be intended to pressure Chairman Bernanke to be more dovish in the monetary policy in hopes that it will help to reduce the unemployment rate. Chairman Bernanke stressed that there’s a question of effectiveness and there are risks and costs that must be carefully monitored. For those who can’t wait for Chairman Bernanke to leave, this reminds us that we could easily get a more dovish chairman who has less concern for the questions of effectiveness, costs and risks of extreme accommodation policies.

A few reporters asked questions about Cyprus and its possible effect on the U.S. economy. Chairman Bernanke explained that it’s a tiny economy with some unique issues, and it shouldn’t have direct implications on the U.S. economy unless depositors in other countries start losing confidence in their banks. One reporter asked if there is any chance that such a tax on deposits could be levied in the U.S. Chairman Bernanke said it would be “extremely unlikely”. He also mentioned that the FDIC actually increased its deposit insurance guarantee during the U.S. economic crisis.

Future FOMC Meetings

The next two FOMC meetings are scheduled for April 30/May 1 and June 18/19. The June meeting will include the summary of economic projections and a press conference by Bernanke.

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want_fair_return   |     |   Comment #3
This policy has been nothing more than penalizing (ie: taxing) the savers.
ytyt   |     |   Comment #4


Dear #3,

Au Contraire the monitory policy set by our FOMC has hardly anything to do with the (so called) savers!  And there is so much more to our monitory policy than the (so called) savers. 

The (so called) savers per se, are not factored into policy decisions, neither are they a taget for a penalty, nor are they a tagret for a reward.  Our monitory policy is firmly focused on dual mandate.  Simply put, if the unemployment is high (which at present is) then accommodation is called for, and if the inflation is high (which at present is not) only then the tightening is called for ... In both these cases the (so called) savers do not come into picture.

If you consider what was about to happen in Cyprus, then that's what perhaps is an example of penalizing the depositors of the bank, rather than penalizing the share-holders and/or bond-holders of the bank.

Yours Truly,
- Anon
Wanderer   |     |   Comment #6
Oh... and did I mention that the Russians are quite likely to get their centuries-long dream of a warm water naval base on Cyprus in the process of all this? And, that Russian oligarchs will end up with veto power over the expansion of the EU, through their control of the government of Cyprus via the Cypriot banks, which they will end up owning? But, that will happen long before the financial system, as we now know it, collapses. Gold will be the "last man" standing...
cumulus   |     |   Comment #7
Ken, Thanks much for your always excellent
review and summation of these FOMC meetings.
I along with numerous others are very
ytytytyt   |     |   Comment #10


Dear Readers,

Aha ... we have the stark contrast to the cautious words of Ms George!

>> Wanderer:
>> The economy will eventually be dragged into the deepest depression in history,
>> coupled with high unemployment, decaying industries, looting of bank accounts
>> by governments, high inflation, a new wave of bank insolvencies that the Fed
>> cannot stop and, finally, total collapse of the financial system.

That's amazing contrast to rather moderate words by Ms George!

>> Wanderer:
>> This will be followed by mass rejection of the irredeemable
>> infinitely printed Federal Reserve Note, as well as its
>> irredeemable cousins, the pound sterling, Euro, yen, et. al.
>> In the end, therre will be issuance of a new version of the
>> US dollar backed by gold, and reissuance of the Lira, French
>> franc, German mark, etc.

It is quite breathtaking to note the complete certainty with which this guy is predicting the future ... wow.

Yours Truly,
- Anon
Wanderer   |     |   Comment #11

Esther George is deeply involved with the Federal Reserve as a regional FRB President. She obviously cannot speak her mind freely in public. So, her words are cautious. Were I were speaking in an official capacity, I would also be cautious.

Incautious words, spoken by persons closely identified with positions of authority or power, in the system, can become self-fulfilling prophecies. So, you think about a lot of issues that you choose not to talk about. No one wants to cause painful events. But, they will happen, regardless of whether we want them to.

When you talk to the public, you always try to put a positive on things.