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FOMC sticks with current policy
June 20, 2013 – As NAFCU anticipated, the Federal Open Market Committee said Wednesday that it was continuing its quantitative easing program and keeping the federal funds target rate at a range of 0 to 0.25 percent – measures that NAFCU Chief Economist David Carrier expects may continue for quite some time.
Carrier said the panel, in a statement issued at the close of its two-day policy setting session, offered "no hint" of a policy change. And despite some confusion in the markets following earlier policy statements, there still was no added clarification from the Fed on just what economic conditions might warrant a change in policy.
"The Fed simply noted that although the economy is gradually improving, the fiscal drag from sequestration isn't helping. So they are standing pat with their accommodative policies, with inflation and unemployment targets that are unlikely to be achieved in 2013," Carrier said. "And it could take much longer than that."
The Fed is prolonging purchases of additional agency mortgage-backed securities at a pace of $40 billion a month. The Fed also stated it will continue to purchase longer-term Treasury securities at a pace of $45 billion per month and maintain its existing policy of reinvesting principle payments and rolling over maturing Treasury securities.
The FOMC, in its statement, said downside risks for the economic outlook and the labor market have diminished. It added:
- Economic activity has been expanding at a moderate pace.
- Labor market conditions have improved recently.
- Household spending and business fixed investment advanced.
- The housing sector has strengthened.
- Fiscal policy is restraining economic growth.
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