federal reserve

What did the Federal Reserve say?

Translating the Fed

What the Fed saidWhat the Fed meant
What the Fed said:FED: Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that underutilization of labor resources was little changed. Growth in household spending declined; households' real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high. Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined.What the Fed meant:Translation: The economy is basically stuck in the mud as nearly every indicator drooped since March: fewer jobs were added to the economy; spending by businesses and individuals went down; and housing continues to lag. The only bright spot is that consumers don't pay attention to any of this, so they still feel good because low energy prices are buoying their spirits and wallets.

Shhh ... Nobody tell them that the economy is faltering, this is all a temporary phenomenon anyway.
What the Fed said:FED: Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.What the Fed meant:Translation: Inflation is still not heating up -- but that's hardly a surprise, given all these falling prices in energy and imported goods. Part of that is due to the way the dollar has been throwing its weight around on currency markets. Economists predict that inflation will start popping eventually, however.
What the Fed said:FED: Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Although growth in output and employment slowed during the first quarter, the Committee continues to expect 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.What the Fed meant:Translation: The Fed has set for itself two goals: maximum employment and 2 percent inflation. Manipulating interest rates downward can spur individuals and businesses to borrow money and spend with abandon. Businesses could expand and hire more workers. In turn, individuals could buy houses, pick-up trucks and Apple Watches. In theory, that should spur a healthier level of inflation and economic growth -- but it hasn't. Theory and reality are sometimes different, it turns out.
What the Fed said: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 declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.What the Fed meant:Translation: Even though inflation hasn't kicked in just yet, the Committee is positive it's totally going to. Like your feelings about your BFF's bad-news boyfriend, everyone is hoping today's sickly inflation just goes away.

The most recent reading of the Fed's preferred inflation measurer showed that core prices, excluding food and energy, increased at a measly 1.4 percent over the past 12 months as of the end of February. The forecast is for more of the same in the short term, giving way to rising prices over time -- once all this strong dollar and cheap oil nonsense goes away.
What the Fed said:FED: To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 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.What the Fed meant:Translation: The Federal Reserve is predicating the coming rate increase on a host of financial metrics, including the cost of tea in China, which way the wind is blowing in Europe and probably even the pattern that a handful of bones forms when scattered across the ground.
What the Fed said:FED: 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.What the Fed meant:Translation: Just because it's been an hour doesn't mean your cake is done cooking. The mere fact that everyone expects an interest rate increase in June or September doesn't mean it will happen; the Fed's interest rate oven is data-dependent.
What the Fed said: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.What the Fed meant:Translation: The balance sheet of the central bank weighs in around $4.5 trillion (just a wee bit more than you've got in your retirement account), and much of that is tied up in Treasury bonds and mortgage-backed securities. As bonds mature, the Fed shovels the money back into the portfolio by purchasing new bonds to help keep longer-term interest rates low. That should help businesses buy lots of buildings and business-stuff and consumers can buy homes plus many expensive doodads to stuff into those homes.
What the Fed said: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.What the Fed meant:Translation: Don't expect rates to increase in any significant way after the first rate hike. The inscrutable FOMC strikes again. Don't blame them, they're data-dependent.
What the Fed said: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.What the Fed meant:Translation: Isn't it nice when everyone is on the same page?


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