FOMC Press Conference March 19, 2014 | Summary and Q&A

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March 19, 2014
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Federal Reserve
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FOMC Press Conference March 19, 2014

TL;DR

Chair Yellen gives an update on the Federal Open Market Committee's decisions, stating that despite some softer recent data, they expect continued progress towards maximum employment and inflation returning to 2 percent.

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Key Insights

  • πŸ₯… The FOMC expects continued progress towards their goals of maximum employment and inflation returning to 2 percent.
  • πŸ₯Ή The pace of asset purchases will be reduced, but the FOMC will continue to expand holdings of longer-term securities.
  • πŸƒ Inflation running persistently below the FOMC's objective could pose risks to economic performance.
  • ☠️ The FOMC's projections for the unemployment rate and GDP growth indicate ongoing improvement in the economy.
  • ☠️ The FOMC's forward guidance has been revised to better reflect current conditions and factors that will influence the future path of short-term interest rates.
  • 😘 The FOMC anticipates a lower-than-normal rate even once the economy has returned to its longer-run normal level.
  • 🧑 The Committee will take a balanced approach to attaining its objectives and will consider a wide range of information in their decision-making.

Transcript

CHAIR YELLEN. Good afternoon. I am pleased to join you for the first of my post-FOMC press conferences. Like Chairman Bernanke before me, I appreciate the opportunity these press conferences afford to explain the decisions of the FOMC and respond to your questions. The Federal Open Market Committee concluded a two-day meeting earlier today. As you ... Read More

Questions & Answers

Q: What is the reason behind the FOMC's decision to make another reduction in the pace of asset purchases?

The FOMC believes that there is sufficient underlying strength in the economy to support ongoing improvement in the labor market, despite some softer recent data. However, inflation is still running below their 2 percent objective.

Q: How does the FOMC determine the appropriate pace of asset purchases?

The FOMC assesses the progress of the labor market and inflation, and makes decisions based on their outlook for these factors. The pace of asset purchases is not on a preset course and will depend on the Committee's assessment of the likely efficacy and costs of such purchases.

Q: How has the FOMC updated its forward guidance regarding short-term interest rates?

The FOMC has revised its forward guidance to better reflect current conditions and the future path of rates. They will assess progress towards their objectives of maximum employment and 2 percent inflation in determining how long to maintain the current 0 to ΒΌ percent target range for the federal funds rate.

Q: What factors will the FOMC consider when deciding how long to maintain the current target range for the federal funds rate?

The FOMC will consider measures of labor market conditions, inflation pressures and expectations, and financial developments. The longer any shortfall in employment or inflation from their objectives is expected to persist, the longer the target federal funds rate is likely to remain in the present range.

Summary & Key Takeaways

  • The Federal Open Market Committee (FOMC) has made another modest reduction in the pace of its purchases of longer-term securities.

  • The FOMC expects continued improvement in the labor market, but inflation is still running below their 2 percent objective.

  • The FOMC will continue to assess incoming data to ensure policy is consistent with their objectives.

  • The FOMC has updated its forward guidance regarding short-term interest rates, emphasizing the factors that will influence the future path of rates.

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