Dollars and Jens
Wednesday, January 30, 2013
The FOMC statement, as revised:
Information received since the Federal Open Market Committee met in
OctoberDecember suggests that growth in economic activity and employment havepaused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Althoughbut the unemployment rate has declined somewhat since the summer, itremains elevated. Household spending has continued to advanceand business fixed investment advanced, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowedimprovement. Inflation 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 sufficientexpects that, with appropriate policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditionswill proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. Furthermore,Although strains in global financial markets continue to pose significanthave eased somewhat, the Committee continues to see downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will 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 purchaseand longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initiallyat 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 resumeof rolling over maturing Treasury securities at auction. Taken 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, 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 decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least 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; James Bullard; Elizabeth A. Duke;
Dennis P. Lockhart; Sandra PianaltoCharles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo ; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriateEsther L. George, 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.
A surprisingly weak report, though in my opinion this is about the best imaginable breakdown for a .1 percent annual rate decline. Exports were weaker than the previous quarter, but most of the drop was due to a decline in government spending and a slowdown in inventory accumulation (which, note, was still positive, but was 1/3 of its value in the previous quarter).
|I 09||II 09||III 09||IV 09||I 10||II 10||III 10||IV 10||I 11||II 11||III 11||IV 11||I 12||II 12||III 12||IV 12|
|Gross domestic product||-5.3||-.3||1.4||4.0||2.3||2.2||2.6||2.4||.1||2.5||1.3||4.1||2.0||1.3||3.1||-.1|
|Change in private inventories||-2.29||-1.03||.19||4.55||2.23||.07||1.97||-1.61||-.54||.01||-1.07||2.53||-.39||-.46||.73||-1.27|
|Net exports of goods and services||2.45||2.47||-.70||-.05||-.83||-1.81||-.95||1.24||.03||.54||.02||-.64||.06||.23||.38||-.25|