FOMC Press Conference April 25, 2012 | Summary and Q&A

TL;DR

Federal Reserve Chairman, Ben Bernanke, announces that the FOMC will maintain current accommodative policies and keep interest rates low until late 2014, in order to support economic recovery.

Key Insights

• ❓ The FOMC is maintaining highly accommodative policies to support economic recovery.
• ☠️ The unemployment rate remains elevated at 8.2 percent, but the Committee expects it to gradually decline over the next several years.
• 😚 Inflation is expected to stay close to the 2 percent target, despite temporary fluctuations caused by factors like higher gasoline prices.
• ⚖️ The Committee remains prepared to take additional balance sheet actions if necessary to achieve its objectives.
• 😃 The Fed is working towards eliminating too-big-to-fail by strengthening supervisory oversight of large financial institutions and establishing tools for an orderly liquidation.
• 👾 The economic recovery has been slow and frustrating, with the pace of improvement in the labor market a major concern.
• 🇨🇫 The Fed will continue to improve transparency and communication with markets and the public.

Transcript

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Questions & Answers

Q: Is the FOMC any closer to implementing QE3 (quantitative easing) than before?

The Committee remains prepared to take additional balance sheet actions if necessary but will assess the economic outlook, risks, progress towards unemployment and inflation goals, and the costs and risks of additional policy actions before making any decisions.

Q: Do you see a risk that inflation will not fall to 2 percent or below, as previously projected?

While core inflation and some measures of underlying inflation have been stronger than expected, the fundamentals suggest that inflation will stay close to the 2 percent target. The recent rise in gasoline prices is expected to be temporary.

Q: How much more weakness would you need to see for QE3 to be implemented?

The Committee will continue to assess the economic outlook and progress towards its objectives. If the outlook weakens significantly or if unemployment is not making sufficient progress, additional balance sheet actions may be taken.

Q: Will the fiscal cliff (a series of tax increases and spending cuts) affect the Fed's monetary policy decisions?

The fiscal cliff is a significant risk to the economic recovery, and the Committee will take fiscal policy into account. However, if there is no action taken by the fiscal authorities, the size of the fiscal cliff is such that the Fed would not be able to offset its effect on the economy.

Summary & Key Takeaways

• The Federal Open Market Committee (FOMC) is maintaining the current highly accommodative policies and keeping interest rates at low levels until late 2014.

• Incoming information suggests that the economy has been expanding moderately, but the ongoing weakness in the housing sector and global financial market strains continue to pose risks to the outlook.

• The unemployment rate has improved but remains elevated at 8.2 percent, and the Committee expects it to gradually decline over the next several years.