No Change in FOMC Policy; Slower Growth

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At some point in time the Fed has to stop dumping money into the bond market. At that point a very large jump in interest rates can be expected. Please read the article below.

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While noting “improvement in economic activity and labor market conditions,” the Federal Open Market Committee voted Wednesday to continue its policy of near-zero interest rates and its $85-billion-per-month bond-buying program.

At the same time, the Fed’s own economic projections suggested the economy might not grow this year as fast as it expected just three months ago.

In a statement concluding its two-day monetary policy meeting, the FOMC said it “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

The Committee adopted the policy by a 9-1 vote with only Esther George, president of the Kansas City Fed, dissenting. St. Louis Fed President James Bullard, who had joined with George in her dissents earlier this year, voted in the majority as he had at the July meeting.

“The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market,” the FOMC said in its statement. “The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”

The reference to “the tightening of financial conditions” was seen as a comment on the recent increase in mortgage rates, some of which resulted from the Fed’s own discussion of tightening its monetary policy.

To read the complete article please use the link below.

No Change in FOMC Policy

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