FOMC Press Conference December 18, 2013

TL;DR

The Federal Reserve has decided to decrease the pace at which it is increasing the size of its balance sheet and clarified its guidance on interest rates.

Transcript

CHAIRMAN BERNANKE. Good afternoon. The Federal Open Market Committee (FOMC) concluded a two-day meeting earlier today. As you already know from our statement, the Committee decided, starting next month, to modestly reduce the pace at which it is increasing the size of the Federal Reserve's balance sheet. The Committee also clarified its guidance on... Read More

Key Insights

• 💨 The FOMC believes that the economy is making progress but still has a long way to go before conditions can be considered normal.
• 🍉 While the job market has improved, there are concerns about underemployment, long-term unemployment, and declines in labor force participation.
• 🏃 Inflation has been running below the Committee's target of 2 percent, and they are monitoring inflation developments carefully.

Questions & Answers

Q: What led the FOMC to decide to reduce the pace of asset purchases?

The decision was based on the Committee's assessment that the economy is making progress and no longer requires as much stimulus. The job market has improved, and there is an expectation that economic growth will pick up in the coming quarters.

Q: What impact will the reduction in asset purchases have on interest rates?

The reduction in asset purchases does not signal a tightening of monetary policy. Interest rates are expected to remain low for an extended period. The Committee will continue to provide a high level of monetary accommodation to support the economy.

Q: What are the FOMC's projections for economic growth and unemployment?

FOMC participants expect economic growth to pick up over the next few years, with a central tendency projection of 2.2 to 2.3 percent for 2013. The unemployment rate is projected to decline to between 6.3 and 6.6 percent in the fourth quarter of 2014 and between 5.3 and 5.8 percent by the final quarter of 2016.

Q: How does the FOMC view inflation?

The Committee acknowledges that inflation has been running below its 2 percent target. However, they expect inflation to gradually move back toward the target as the economy expands. The central tendency projection for inflation is 0.9 to 1.0 percent for 2013, rising to 1.7 to 2.0 percent in 2016.

Summary & Key Takeaways

• The Federal Open Market Committee (FOMC) has decided to modestly reduce the pace of asset purchases starting next month.

• The decision reflects the Committee's assessment that the economy is making progress but still has a long way to go before normal conditions are achieved.

• While the job market has improved, the recovery is not complete, and inflation remains below the Committee's target.