It was expected that there would be no change in the interest rate policy from the Federal Open Market Committee today. In fact, it was not even all that expected that any great revelations would be released. After all, QE3 is still just weeks old.
A couple of things we were expecting to hear. First is that the housing market should have been shown to be improving. Second, while a huge drop magically came in unemployment to 7.8% from 8.1% the FOMC was expected to stand pat on its stance that employment has remained a disappointment and that it needs to improve.
A few key issues brought up by the FOMC were as follows:
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has advanced a bit more quickly, 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 higher energy prices. Longer-term inflation expectations have remained stable.
The Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month… and will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it 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.
In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
Jeffrey Lacker was again a dissenting vote.
JON C. OGG
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