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March 13, 2012 January 25, 2012

Statement·Presser·Minutes

BBBen S. Bernanke

March 13, 2012 FOMC Statement

Target range 0.00–0.25% unchanged Vote 9–1 · Dissents: Lacker ↑ Tone: Clearly dovish -0.99
At a glance·Statement·Our summary

FOMC statement

Federal Reserve issues FOMC statement

For immediate release

Information received since the Federal Open Market Committee met in December January suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor moderately. Labor market conditions, conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending has continued to advance, but growth in and business fixed investment has slowed, and the have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and longer-term gasoline have increased lately. 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 moderate 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 have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee also anticipates that over coming quarters, subsequently inflation will run at levels at or below those the rate that it judges most consistent with the Committee's its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels the rate most consistent with the 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 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 late 2014.

The Committee also decided 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 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; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; 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 does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate. rate through late 2014.

Source

Our summary

What changed

  • The FOMC upgraded its assessment of labor market conditions, noting further improvement and a notable decline in the unemployment rate, though it remains elevated.
  • It revised its outlook for global financial strains, saying they have eased but still pose significant downside risks.
  • The FOMC acknowledged recent increases in crude oil and gasoline prices, expecting them to push up inflation temporarily before it returns to or below its mandate-consistent rate.
  • The policy stance was unchanged: the federal funds rate target range remains 0 to 1/4 percent, with the expectation of exceptionally low rates through late 2014, and the maturity extension program continues.
  • The vote was again 9-1, with Jeffrey M. Lacker dissenting, but his dissent language changed to state he does not anticipate economic conditions warranting exceptionally low rates through late 2014.

Implications

The upgraded labor market language and the easing of global strains suggest the FOMC sees a slightly more favorable economic backdrop, but the unchanged forward guidance indicates no near-term policy shift.

The acknowledgment of temporary oil-driven inflation, while reiterating that inflation will subsequently run at or below target, signals the FOMC views the recent price pressures as transitory and not a reason to alter policy.

Summary generated automatically from the statements. Not investment advice.