Like virtually every report documenting US economic conditions of early 2014, the Federal Reserve blamed a sharp contraction almost entirely on the historically harsh winter weather. However, that appears to be in the rearview mirror enough for its Federal Open Market Committee (FOMC) to stay the course on rates and cutbacks to its assets purchase program without a hint of hesitance.
Emerging from a two-day policy meeting, the FOMC announced plans to continue stimulus spending reductions by a total of $10 billion, as it has during recent meetings under both former Chairman Ben Bernanke and new Chairman Janet Yellen, in two areas. It will decrease from $25 billion to $20 billion per month in agency mortgage-backed securities purchases and from $30 billion to $25 billion per month in adding longer-term Treasury securities. The Fed statement predicted it would continue the tapering should inflation conditions remain in line with expectations and employment levels maintain stability or continue to improve. The Fed continues to believe such actions will put downward pressure on longer-term interest rates and support mortgage markets, both of which “should promote a stronger recovery.”
The FOMC also left the target for the federal funds rate untouched at a range between 0% and 1/4%, noting it would stay at the historic low “for a considerable time after the asset purchase program ends.” Notably, it is the first time in several meetings that the FOMC statement was endorsed unanimously by its voting members.
- Brian Shappell, CBA, CICP, NACM staff writer