April 25, 2012
March 13, 2012
April 25, 2012 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For immediate release
Information received since the Federal Open Market Committee met in January March suggests that the economy has been expanding moderately. Labor market conditions have improved further; in recent months; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The Despite some signs of improvement, the housing sector remains depressed. Inflation has been subdued in recent months, although picked up somewhat, mainly reflecting higher prices of crude oil and gasoline have increased lately. Longer-term gasoline. However, 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 to remain moderate over coming quarters and consequently then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that the Committee it 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 earlier this year is expected to affect inflation only temporarily, but and the Committee anticipates that subsequently inflation 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 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 does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.
Our summary
What changed
- The FOMC noted that labor market conditions have improved in recent months, with the unemployment rate declining but remaining elevated, a slight downgrade from the previous 'notably' decline.
- The housing sector is described as 'despite some signs of improvement, remains depressed,' adding a note of improvement not present in March.
- Inflation language shifted from 'subdued' to 'picked up somewhat,' mainly due to higher oil and gasoline prices, while still expecting the increase to be temporary.
- The economic outlook now expects growth to 'remain moderate over coming quarters and then to pick up gradually,' adding a gradual pickup not mentioned before.
- The policy stance, including the federal funds rate target range and asset purchase programs, remained unchanged, with the same dissenting vote from Jeffrey M. Lacker.
Implications
The slight upgrade in housing and the expectation of a gradual pickup in growth suggest the FOMC sees the recovery as on track, though still facing downside risks from global financial strains.
The acknowledgment of higher inflation, while emphasizing its temporary nature, indicates the FOMC is not concerned about a sustained inflation overshoot, supporting the continued accommodative stance.
The unchanged forward guidance and dissenting vote signal that the FOMC remains committed to its late-2014 threshold, with no immediate shift in policy expected.
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.
April January median January median
Scroll the chart sideways for the later years.
Press conference
April 25, 2012, 2:30 p.m. ET · Read the transcript
What Bernanke said that the statement didn't
- The chair said the unemployment rate had fallen nearly a percentage point since August, to 8.2 percent.
- He cited participants' projections for the unemployment rate in the fourth quarter of 2012 with a central tendency of 7.8 to 8.0 percent, declining to 6.7 to 7.4 percent by the fourth quarter of 2014.
- He noted participants' projections for inflation had a central tendency of 1.9 to 2.0 percent for 2012 and 1.7 to 2.0 percent for 2014.
- He said the FOMC's decision to maintain the guidance was a 9-to-1 vote in favor.
- He stated that if no action were taken by fiscal authorities, the size of the fiscal cliff was such that there was absolutely no chance the Federal Reserve could offset its effect on the economy.
Summary generated automatically from the transcript and the statement.