{"id":312,"date":"2014-09-17T15:38:39","date_gmt":"2014-09-17T19:38:39","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=312"},"modified":"2014-09-23T10:40:25","modified_gmt":"2014-09-23T14:40:25","slug":"sept-16-17-04-fomc-meeting","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=312","title":{"rendered":"Sept 16-17 \u00e2\u20ac\u02dc04 FOMC Meeting"},"content":{"rendered":"

In a Nutshell:<\/strong> \u00e2\u20ac\u0153\u00e2\u20ac\u00a6 a range of labor market indicators suggests that there remains significant underutilization of labor resources.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

Rate Decision:<\/em><\/strong> Fed funds rate maintained at a range between 0% and 0.25% <\/em><\/p>\n

Quantitative Easing Decision<\/em><\/strong>: <\/em><\/strong>Bond purchases reduced by $10 billion to $15 billion.\u00c2\u00a0 Quantitative easing is expected to end at the next meeting.<\/em><\/p>\n

One again, the FOMC and Janet Yellen tried to provide some clarity about how the monetary authorities will proceed with rate hikes when they eventually come. \u00c2\u00a0And again, we did not get much that was new.<\/p>\n

On the economic front, the economy continues to improve but there remains a significant amount of slack in the labor market.\u00c2\u00a0 That was Chair Yellen\u00e2\u20ac\u2122s reason why wages are showing little change.\u00c2\u00a0 It is all about a tight labor market and the Fed doesn\u00e2\u20ac\u2122t see that situation occurring soon.\u00c2\u00a0 As it does four times a year, the FOMC released the members\u00e2\u20ac\u2122 forecasts for growth, inflation and unemployment rates. The central tendency of the forecasts puts full employment in the 5.2% to 5.5% range, which is not expected to be reached until sometime in late 2015 or early 2016.\u00c2\u00a0 However, the members are a bit more optimistic about pace of decline in the unemployment rate.<\/p>\n

As for when the Fed might tighten, those who thought that the FOMC might signal that rates could rise sooner rather than later were disappointed.\u00c2\u00a0 The Fed Chair made it clear that she was in no hurry to raise rates.\u00c2\u00a0 But she also noted that the decision is not \u00e2\u20ac\u0153calendar driven\u00e2\u20ac\u009d but is \u00e2\u20ac\u0153data driven\u00e2\u20ac\u009d.\u00c2\u00a0 The hawks are not making very much inroads into Fed policy.<\/p>\n

Finally, the Committee went over procedures for normalizing policy.\u00c2\u00a0 One new thing was that the FOMC would be targeting rate ranges rather than a given rate.\u00c2\u00a0 That may be reflection of the concern that transitioning to a normal Fed policy and a normal Fed balance sheet will likely have some bumps in the process.\u00c2\u00a0 It would be amazing if the Fed pulls off the normalization process without any hiccups.<\/p>\n

So what should we make of all this? \u00c2\u00a0Janet Yellen is firmly in command at the Fed and we should stop doubting it.\u00c2\u00a0 She is a dove and until the data make her think differently, she will run monetary policy accordingly.<\/p>\n

But I have some issues with the Fed\u00e2\u20ac\u2122s forecast.\u00c2\u00a0 The unemployment rate has declined by about 0.7 percentage point for the past three years yet the members think the decline will slow sharply starting in 2015 and only edge down in 2016 and 2017.\u00c2\u00a0 Yet growth is expected to be a lot stronger over the next two years than it had been.\u00c2\u00a0 This doesn\u00e2\u20ac\u2122t seem to be consistent.\u00c2\u00a0 But it is necessary for the members to argue that the funds rate will not be increased soon and will not be raised quickly, which they seem to be indicating.<\/p>\n","protected":false},"excerpt":{"rendered":"

In a Nutshell: \u00e2\u20ac\u0153\u00e2\u20ac\u00a6 a range of labor market indicators suggests that there remains significant underutilization of labor resources.\u00e2\u20ac\u009d Rate Decision: Fed funds rate maintained at a range between 0% and 0.25% Quantitative Easing Decision: Bond purchases reduced by $10 billion to $15 billion.\u00c2\u00a0 Quantitative easing is expected to end at the next meeting. One … Continue reading Sept 16-17 \u00e2\u20ac\u02dc04 FOMC Meeting<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-312","post","type-post","status-publish","format-standard","hentry","category-federal-reserve-policy"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=312"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/312\/revisions"}],"predecessor-version":[{"id":313,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/312\/revisions\/313"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}