Dollars and Jens
Wednesday, December 12, 2012
The FOMC statement, as revised:
Information received since the Federal Open Market Committee met in
SeptemberOctober suggests that economic activity hasand employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Growth in employment has been slow, andAlthough the unemployment rate has declined somewhat since the summer, it remains elevated. Household spending has advanced a bit more quicklycontinued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation recently picked up somewhat, reflecting higherInflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely
wouldwill run at or below its 2 percent objective.
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 will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will
continue through the end of the yearpurchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities , and itis completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should putTaken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities
, undertake additional asset purchases, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee
also decided todaydecided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levelsthis exceptionally low range for the federal funds rate are likely to be warrantedwill be appropriate at least through mid-2015.as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
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; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed
additional asset purchases and disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate andthe asset purchase program and the characterization of the conditions under which an exceptionally low levelsrange for the federal funds rate are likely to be warrantedwill be appropriate.
Possibly moved phrases: a highly accommodative stance of monetary policy housing sector has shown further signs of improvement