August 24, 2014

FOMC minutes show optimism

Aug. 21, 2014 – NAFCU Chief Economist and Director of Research Curt Long analyzed the meeting minutes from the July Federal Open Market Committee meeting, and found that committee members seem optimistic about trends in the labor market and inflation.

After the two-day meeting, the Federal Open Market Committee put out a statement announcing it would slow asset purchases by an additional $10 billion per month in August to a pace of $25 billion per month. The statement said the Fed would slow its purchases of mortgage-backed securities to a pace of $10 billion a month – down from $15 billion – and of longer-term Treasury securities to a pace of $15 billion per month – down from $20 billion. The federal funds rate target remains at a range of 0 to 0.25 percent.

In the minutes, Long said committee members noted that if inflation and labor market trends continued to beat their expectations, the rate normalization might begin "sooner than they currently anticipated." More information is expected to be provided to the public later this year on when rate hikes will occur.

The committee members also acknowledged recent inflation increases, but did not find evidence of widespread valuation pressures in asset markets.