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UPDATE: The Federal Reserve Open Market Committee said it “will provide additional accommodation as needed” and did not change its prediction for low rates through late 2014.It acknowledged that economic growth had slowed during the first half of the year, yet failed to take any new action to bolster the sluggish economy.
That’s sending stocks down, with the Dow off about 40 points in the wake of the announcement.
The statement gave no mention of discussions about future Fed non-standard easing measures like QE3, something most analysts had expected to see in some form.
The fact that the committee even failed to adopt some of the more basic monetary policy easing moves will disturb those who already think the Fed is doing too little to support economic growth.
Here’s the full statement:
Release Date: August 1, 2012
For immediate release
Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year. Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
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 expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 per cent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it 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. The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant an exceptionally low level of the federal funds rate.
ORIGINAL: The Federal Reserve will make its latest monetary policy decision at 2:15 PM ET today, and while investors might like a gift from Bernanke, they’re unlikely to get it.
According to statements made by Bernanke and media reports, the Fed has been considering doing more to stimulate sluggish economic growth.
Such policy action could even include a new round of expansionary quantitative easing. Earlier rounds of QE dramatically boosted stocks by giving banks more cash.
However, recent reports suggest that those hoping for action today are likely to be disappointed. Waiting until December to take monetary policy action would give the Fed time to analyse another round of economic data. And while economic growth slowed in the second quarter, analysts doubt this slowdown will be sufficient to prompt Fed action.
There’s no press conference following this decision announcement, but we’ll have the text of the decision and analysis right here.
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