The Federal Reserve’s Federal Open Market Committee (FOMC) released its customary statement at the conclusion of its meeting on Wednesday. FOMC members oversee the Fed’s monetary policy. In recent months, investors and economists have speculated on whether or not the Fed would continue tapering its asset purchases under its latest quantitative easing (QE) program, and whether the Fed would raise its target federal funds rate of 0.00 to 0.250 percent.
According to its statement, FOMC members plan to continue tapering monthly asset purchases of Treasury securities and mortgage-backed securities until asset purchases under the QE program conclude in October. FOMC statements have repeatedly indicated that members do not foresee raising the target federal funds rate for a “considerable period” after the QE asset purchases cease. Wednesday’s FOMC statement reasserted this position, and said that the committee may keep the current target federal funds rate at its current level for “some time” after employment levels and inflation reach normal levels.
Committee member and Philadelphia Federal Reserve Bank President and CEO Charles I. Plosser objected to use of the term “considerable period” as being “…time dependent and not reflecting economic progress made toward the committee’s goals.”
The committee’s comments about asset purchases and the target federal funds rate included the usual reminder that asset purchases and determination of the target federal funds rate are not on a predetermined course and are subject to adjustment should economic conditions merit changes in FOMC monetary policy.
FOMC Concerned with Housing Markets, Unemployment
The committee’s statement said that while FOMC members noted improvements in labor markets, but the unemployment rate remains elevated. The FOMC statement noted that “a range of labor market indicators suggest that there remains significant underutilization of labor resources.”
In spite of encouraging labor market reports, FOMC members remain concerned about overall labor market conditions, and are not relying on the national unemployment rate alone as an accurate measure of labor market health.
Home prices continue to rise, but at a slower pace in many areas. On a positive note, the statement indicated that FOMC members found that the likelihood of inflation running consistently below the committee’s target rate of 2.00 percent was “diminished somewhat.”
While Wednesday’s FOMC statement reflected signs of an ongoing economic recovery, it’s evident that FOMC members plant to keep a close eye on factors that impact their expectations for the economy.
Last week’s economic news included several reports related to housing and mortgages. The NAR started the week on a positive note with its Pending Home Sales Index released Monday. Pending home sales in March were higher with an unexpected increase of 3.40 percent over February for an index reading of 97.40.