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Fed funds unchanged, Fed asset purchases slowing
The Federal Reserve will reduce its monthly asset purchases further next month and is making no change currently in the federal funds target rate, which is now at 0 to 0.25 percent, the Federal Open Market Committee said Wednesday.
In its statement, the FOMC said there would be "considerable time" before the Fed moves to raise interest rates.
Curt Long, NAFCU's chief economist and director of research, said recent data on employment and consumer prices are keeping the Fed's policy statements in check for now. "The FOMC played it close to the vest with this month's statement," said Long. "Given the weakness of the most recent economic and inflation reports, any indication that a rise in rates was in play in the near term would have been an unwelcome surprise to market participants."
.jpg "Janet Yellen125") |
| Janet Yellen |
In a press conference, Federal Reserve Board Chair Janet Yellen noted continued slack in the labor market. She told reporters her focus is on unemployment, the number of people who are working part-time for economic reasons, people not searching for jobs but who would be if the economy were stronger, and slow wage growth.
As for asset purchases, the committee said the Federal Reserve plans to reduce its monthly purchases of mortgage-backed securities to $5 billion and longer-term Treasury securities to $10 billion in October. It will continue to reinvest principle payments and roll over maturing Treasury securities.
The FOMC said if data support expectations of continued labor market improvements and inflation moving back toward its longer-run objective, "the Committee will end its current program of asset purchases at its next meeting."
According to Long, "At that point, they will lose a very convenient diversion, and the spotlight will be squarely on the federal funds rate."