FOMC Meeting Surprise! Committee Finds Justification to Continue Doing What They’re Doing
January 30, 2013
Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.
Damn that weather… and other transitory factors.Â Itâ€™s just killing our economic recovery.Â At least the ongoing foreclosure filings and repossessions still arenâ€™t a problem.
Employment has continued to expand at a moderate pace but the unemployment rate remains elevated.
Thatâ€™s what they call double speak, right?
Household spending and business fixed investment advanced, and the housing sector has shown further improvement.
Household spending absolutely sucked eggs for the fourth quarter, we should all recall. Â And that was… what… a month ago? Â My have things changed since then… I can feel it all around me. Â
As to business fixed investment advancing… whatever that means… I guess… yay? Â I love it when FIXED INVESTMENT ADVANCES… it’s so much better than when it just sits there… Â FIXED? Â
Oh, whatever… if the FOMC wants me to believe that sentence means something good, why the hell not? Â After all… I’ve come this far.
Inflation has been running somewhat below the Committeeâ€™s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices.
Well, as long as inflation is running somewhat below the committeeâ€™s longer-run objective… I guess everything is fine. Â But taking out gas and food prices is ridiculous because all I buy are gas and food.
Longer-term inflation expectations have remained stable.
Thank heavens for the stability of Â longer-term expectations.Â But for the record, this committeeâ€™s expectations havenâ€™t been right even once since 1995.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.
So, that’s what we’re all waiting for… unemployment to gradually decline towards levels the Committee judges consistent with its dual mandate. Â And here I was thinking we were waiting until our economy started creating something beyond jobs at McDonalds and Wal-Mart. Â
And as to the whole growth thing… one caveat applies, I suppose… unless, bad weather strikes yet again, in which case all bets are off. Â
Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook.
Would those be weather related downside risks or something else?Â Because so far you guys havenâ€™t said a word about what those downside risks might be.
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.
Have you noticed that Ben Bernanke would rather cut off his tongue than say the word â€śdeflation.â€ť
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. 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. Taken together, these actions should maintain downward pressure on Â longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
In other words, everything weâ€™ve said thus far leads us to the inescapable conclusion that what weâ€™re doing already we should continue doing.Â Amazing, arenâ€™t we?
The Committee will closely monitor incoming information on economic and financial developments in coming months.
Thanks for that.Â Iâ€™m glad you guys werenâ€™t planning to just stop even looking at the incoming information from here on out. Â Even though you actually could and it wouldn’t matter one bit.
If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
In other words, assuming everything continues as it has for the last four years, which is the only possibility since weâ€™re not fixing anything but merely pumping hot air in and out of the system, then weâ€™ll keep pumping the same hot air in and out of the system thereby assuring the financial markets that nothing will get better but neither will it get significantly worse.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.
So, even if we start telling you things are improving, that doesnâ€™t mean we will actually have to change what weâ€™re doing in any way, because then you might see that itâ€™s only hot air thatâ€™s making things look good… so just believe what we say and pay no attention to what we continue to do.
In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committeeâ€™s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.
Weâ€™re going to keep this artificial life support going longer than they did in Japan if necessary… blah, blah, blah.
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.
When this Committee decides to begin to remove policy accommodation, you guys reading this today will be dead or so old you wonâ€™t remember what we just said.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.
Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.
But, we all think Ester is a bit of a kook.
I don’t know what we’d do without the FOMC… except maybe… be forced to make real progress in some substantive way. Â But that would mean having to admit that someone was once wrong about something somewhere, and there’s no way anyone wants that, so FOMC… keep up the great work.
And would some please set an alarm for Never-thirty and wake me when this is over.