Uneventful FOMC Meeting as Expected

April 30, 2014

A statement released after the two-day Federal Open Market Committee meeting this week reads almost identically to the prior March 19 statement.  The few changes made involved the first paragraph mostly, which deals with the committee’s view of economic conditions.  As at the three prior meetings in December, January and March, monthly purchases of mortgage-backed securities and longer-dated Treasuries were each reduced by $5 billions and now together total $45 billion.  A third difference between this statement and the one issued six weeks ago is the deletion of Minneapolis Fed President Kocherlakota’s dissent.  He had objected in March to the wording of paragraph #5, fearing that such “weakens the credibility of the Committee’s commitment to return inflation to the 2% target from below and fosters policy uncertainty that hinders economic activity.”

The following modifications were made to the first paragraph.

  • Recent growth was upgraded to “has picked up.:
  • Consumer spending was characterized as “rising more quickly,” and upgrade from “continued to advance.”
  • Business investment was downgraded to “edged down” from “continued to advance.”

On inflation, the Committee noted that such remains below the medium-term target and added that longer-term inflation expectations remain “stable.”

The next FOMC meeting, scheduled for June 17-18 will be associated with a Summary of Economic Projections and a press conference by the Chair, Janet Yellen. That will moreover be the last meeting before she presents semi-annual testimony, formerly known as the Humphrey-Hawkins hearings, to each house of the Congress.

On this FOMC day, the dollar softened slightly against the euro but firmed a shade versus the yen.  Treasury yields dipped a bit.  Oil strengthened, but gold lost some ground.  U.S. share prices moved slightly higher.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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