federal reserve

What did the Federal Reserve say?

Mark your calendars -- this was a historic day in Federal Reserve history. The monetary policy statement actually said something in plain English. In place of the word "patient," coherent thoughts appeared, explaining what rate-setters will look for before a rate hike. It has something to do with the labor market and inflation. Here's what Fed policymakers had to say.

Here's what Fed policymakers had to say and what they meant.

What the Fed said

What the Fed meant

FED: Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened.Translation: The hotcakes economy of just a couple of months ago has cooled a bit. Jobs look good and people are spending, aided by the extra money they're saving on gas. Housing is the perennial rotten spot in the economy and the stronger dollar is actually hurting exports, just like pundits predicted.
FED: Inflation has declined further below the Committee's longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.Translation: The central bank is in a pickle. All that inflationary quantitative easing, and there's no inflation. The beatific outlook of the central bank can't be shaken, though as forecasts from economists call for predictable price increases over the long term. Measures of actual inflation today are not nearly so accommodating.
FED: Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced.Translation: The central bank has two jobs: creating the economic conditions to allow most people to find jobs while controlling inflation through interest rates. Despite the lack of enough inflation right now, everything is moving in the right direction.
FED: Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate. The Committee continues to monitor inflation developments closely.Translation: Inflation: Trust us, we got this. Stronger dollar, tanking energy prices, international economic mayhem; all of these will blow over like dark clouds. One bright spot: Disinflation has bottomed out. The January statement predicted a decline and here we are wallowing near the bottom. So there's that.
FED: To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current zero to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress -- both realized and expected -- toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.Translation: Like a delicious custard you're impatiently waiting for, the Fed has stuck its finger into the economic data and determined that it's still a bit soft. Once policymakers expect it to start firming up, rates could increase. For now, it's just a puddle of numbers.
FED: Consistent with its previous statement, the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.Translation: April is off the table for a rate increase. We're all just waiting on inflation to show up so we can get the show on the road. Inflation is usually so punctual, too ...
FED: The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.Translation: Trillions of dollars of investments are still on the books and they are maturing all the time. When they do, the money is rolled into similar investments. It's kind of a quantitative-easing maintenance diet for the economy.
FED: When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.Translation: This is the paragraph in which the Fed covers all the bases. Just because economic conditions look right doesn't mean the central bank will dive in.
FED: Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.Translation: Again a unanimous showing. Either Janet Yellen is a masterful consensus builder, or the Committee is benefiting from the dovish bent of most members.


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The Federal Reserve relies heavily on the words “modest” and “moderate” in describing economic activity around the country over th

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