The second to last FOMC meeting of the year just ended, and there were no surprises in the FOMC statement. As expected, the Fed announced the end of its bond buying program (aka QE3). With the end of QE3, the attention will be turned to the federal funds rate. Unfortunately for us savers, the Fed is still saying "considerable time" for when it anticipates the first interest rate hike. Below is the excerpt of the FOMC statement showing the "considerable time" wording:
The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.
There was one vote against the action, but it wasn’t from an inflation hawk. The inflation dove, Narayana Kocherlakota, voted against the action because he wanted to see a longer commitment of keeping the federal funds rate near zero. Here’s an excerpt from the statement describing the reasoning behind Kocherlakota vote:
Voting against the action was Narayana Kocherlakota, who believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level.
If the inflation outlook remains sluggish over the next few several months, other inflation doves at the Fed may join Kocherlakota, and that could mean no rate hike in 2015.
Future FOMC Meetings
The next two FOMC meetings are scheduled for December 16-17 and January 27-28. The December meeting will include the summary of economic projections and a press conference by Chairwoman Yellen.