April 30, 2014

FOMC says tapering of asset purchases to continue

May 1, 2014 – The Federal Open Market Committee, concluding its two-day monetary policy setting meeting, announced Wednesday that the Federal Reserve will reduce monthly asset purchases by another $10 billion and left the federal funds rate target unchanged.

The Fed announced it will slow its purchase of additional agency mortgage-backed securities to a pace of $20 billion a month, down from $25 billion; and longer-term Treasury securities to a pace of $25 billion per month, down from $30 billion. The federal funds rate target remains at 0 to 0.25 percent.

"The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate," the FOMC said in a statement.

In a Macro Data Flash report, NAFCU's Doug Christman notes the FOMC's observation that growth in economic activity has picked up some after a sharp decline during the winter months. The committee also said unemployment remains high and that inflation is running below the committee's long-term objective, but expectations have remained stable.