Newsroom

March 20, 2014 – The Federal Open Market Committee on Thursday announced the Fed would slow asset purchases by $10 billion to a pace of $55 billion per month in April, but the federal funds rate target is unchanged.

The meeting, which began Tuesday and concluded yesterday, was the first to be presided over by new Fed Chair Janet Yellen.

In a Macro Data Flash, NAFCU Chief Economist David Carrier reported that the FOMC said the labor markets showed some improvement despite slow economic growth amid harsh winter weather conditions, however the unemployment rate remains elevated.

The Fed said it would slow its purchase of additional agency mortgage-backed securities to a pace of $25 billion a month – down from $30 billion – and longer-term Treasury securities to a pace of $30 billion per month – down from $35 billion.

Carrier also noted that the FOMC dropped its previous language about a specific unemployment rate threshold, which he says was anticipated by most analysts given that the current unemployment rate of 6.7 percent is close to the stated target rate of 6.5 percent. He noted, however, that the change does signal a shift in the FOMC's focus to the federal funds target rate, which most FOMC members expect to begin increasing in 2015. A rise in the fed funds target rate will, over time, affect all other interest rates.