There were no surprises today from the FOMC statement. As expected, the tapering continues with a reduction of $10 billion in the Fed’s bond buying program (aka Quantitative Easing). Not only were there no surprises, today’s statement is very similar to the December statement. The primary change was in the description of the state of the economy. Below is a comparison of the December statements and today’s statement:
December FOMC statement excerpt:
economic activity is expanding at a moderate pace. Labor market conditions have shown further improvement; the unemployment rate has declined but remains elevated. Household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months.
January FOMC statement excerpt:
growth in economic activity picked up in recent quarters. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat.
The Fed sounds a little more optimistic regarding economic growth. However, the Fed sounds more pessimistic about the labor markets since the "indicators were mixed." They were still optimistic enough to continue tapering.
Unfortunately for savers, the Fed kept its wording regarding interest rates which indicates the Fed will keep rates low well past the time when the unemployment rate declines below 6-½ percent. Below is the excerpt from today’s statement:
The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal.
All ten Fed members voted for this policy action. With the new year, new Reserve Bank presidents are rotated in as voting members. Unfortunately, we’re losing the inflation hawk Esther L. George as a voting member.
This will be Chairman Bernanke’s last FOMC meeting. Janet Yellen will become the new Fed chairperson effective February 1, 2014.
Future FOMC Meetings
The next two FOMC meetings are scheduled for March 18-19 and April 29-30. The March meeting will include the summary of economic projections and a press conference by the new Chairperson Janet Yellen.