January 25, 2012
December 13, 2011
Statement·Presser·Minutes·Policy
BBBen S. BernankeJanuary 25, 2012 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For immediate release
Information received since the Federal Open Market Committee met in November December suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to be increasing less rapidly has slowed, and the housing sector remains depressed. Inflation has moderated since earlier been subdued in the year, recent months, 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 continues to expect a moderate pace of expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, inflation will run at levels at or below those consistent with the Committee’s Committee's dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
The To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee also 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 percent 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 mid-2013. late 2014.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the The Committee also decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies 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. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate. appropriate to promote a stronger economic recovery 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; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Charles L. Evans, Jeffrey M. Lacker, who supported additional policy accommodation at this time. preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.
The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.
Our summary
What changed
- Extended the federal funds rate guidance from at least mid-2013 to at least late 2014.
- Downgraded business fixed investment outlook from 'increasing less rapidly' to 'growth has slowed'.
- Described inflation as 'subdued' instead of 'moderated since earlier in the year'.
- Replaced the closing paragraph on assessing the outlook with a commitment to maintain a highly accommodative stance.
- Changed voting members: added Lockhart, Pianalto, and Williams; removed Fisher and Kocherlakota; dissent was by Lacker instead of Evans.
Implications
The extension of the rate guidance signals a longer commitment to low rates, suggesting the FOMC sees a weaker inflation and growth path.
The shift to a more explicit accommodative stance and the removal of the assessment sentence imply a forward-leaning bias toward further easing if conditions warrant.
The change in the dissenting view, from favoring more accommodation to opposing the time frame, suggests internal debate centers on the duration of low rates rather than the need for them.
Summary generated automatically from the statements. Not investment advice.
Projections
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
January median
Scroll the chart sideways for the later years.
Press conference
January 25, 2012, 2:30 p.m. ET · Read the transcript
What Bernanke said that the statement didn't
- The chair said the FOMC's longer-run inflation goal is 2 percent as measured by the personal consumption expenditures price index.
- The chair said participants' estimates of the longer-run normal unemployment rate have a central tendency of 5.2 to 6.0 percent.
- The chair said participants' GDP growth projections for 2012 have a central tendency of 2.2 to 2.7 percent, for 2013 of 2.8 to 3.2 percent, and for 2014 of 3.3 to 4.0 percent.
- The chair said six participants anticipate policy firming to commence in 2015 or 2016, five in 2014, and six in 2012 or 2013.
- The chair said 11 participants expect the appropriate federal funds rate at the end of 2014 to be at or below 1 percent, while 6 anticipate higher rates.
Summary generated automatically from the transcript and the statement.