Jan. 31, 2013 – NAFCU Staff Economist Curt Long said the minutes from this week’s two-day Federal Open Market Committee, which concluded yesterday and signaled no new policy actions, “will be highly scrutinized for indications of the committee’s policy directions over the course of the year.”
Long made his comments following the FOMC’s decision to keep the federal funds rate at a range of 0 to 0.25 percent and maintain current policy, which includes purchasing additional agency mortgage-backed securities at a pace of $40 billion a month, purchasing longer-term Treasury securities at a pace of $45 billion per month, reinvesting principle payments and rolling over maturing Treasury securities.
The FOMC also reiterated that the current fed funds rate range is appropriate as long as unemployment is above 6.5 percent, near-term inflation is projected to be no more than 2.5 percent and long-term inflation expectations continue to be well-anchored – specific targets that were outlined at the group’s Dec. 12 meeting.
Long said there is more uncertainty surrounding the bond purchase program than the FOMC’s commitment on interest rates since the committee has yet to provide an end date for the latest round of quantitative easing. “Minutes from the meeting, which will be released Feb. 20, will be analyzed for clues about any possible adjustments to policy,” he said.
In its policy statement, the FOMC noted that “economic activity paused in recent months" and "employment has continued to expand at a moderate pace.” The committee also acknowledged that the unemployment rate remains elevated but pointed to improvements in household spending, business fixed investment and housing. It also reiterated its expectation that inflation “will run at or below its 2 percent objective” over the medium term.