Federal Reserve Commentary: FOMC Announcement - January 2014January 31, 2014 Posted by: Eric Souza
Federal Reserve Commentary: Today's FOMC Meeting AnnouncementIn Ben Bernanke's final meeting as Chairman of the Federal Reserve Open Market Committee, the Fed announced a second $10 billion reduction in monthly bond purchases and did not make any significant changes to the FOMC statement. This second tapering of asset purchases was reduced to $65 billion from the original amount of $85 billion with Treasury purchases now being reduced to $35 billion a month and Agency MBS purchases reduced to $30 billion. The Fed stated these purchases are not on a preset course and that the committee will likely reduce the pace of asset purchases in further measured steps at future meetings. There was no change to the Federal Funds target rate of 0 to 1/4 percent and they kept the forward guidance language of maintaining the current target range of Federal Funds well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below the Committee's 2 percent goal.
There was a slight change to the Committee's view of the economy where The Committee feels that "growth in economic activity picked up in recent quarters" which is a slight change from December's statement that the economy "is expanding at a moderate pace." The Committee added an additional comment on the labor market stating that labor market "indicators were mixed but on balance showed further improvement." There was also no dissenting vote from any of the FOMC members.
Prior to the FOMC announcement, the bond market was rallying and the stock market had sold off. After the statement was released, the markets were unchanged as the statement was in line with expectations.Read More