Overall dovish statements from the FOMC align with their view that “economic activity is expanding at a moderate pace.”
Changes from last statement concur with this sentiment:
“significant underutilization of labor resources” changed to “underutilization of labor resources is gradually diminishing”.
“longer-term inflation expectations had “remained stable” changed to “market-based measures of inflation compensation have declined somewhat”.
“considerable time” for change in funds rate was left in.
to end the third round of quantitative easing
to conclude its asset purchase program, $15bn of monthly bond purchases, this month
to maintain the current 0 to 0.25 percentage range for the federal funds rate
maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities
rolling over maturing Treasury securities at auction
Solid job gains and a lower unemployment rate
Household spending is rising moderately
Business fixed investment is advancing
Inflation has continued to run below the Committee’s longer-run objective
Survey-based measures of longer-term inflation expectations have remained stable
the likelihood of inflation running persistently below 2 percent has diminished
activity will expand at a moderate pace
labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate
inflation in the near term will likely be held down by lower energy prices and other factors
The FED however, left the door open to change: “if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.”
US dollar rallied
S&P fell 13 points and then recovered to almost unchanged
US government bond prices down
Gold down $16 (more than 1%)
Asian markets: USD/JPY up as much as 0.3 percent to Y109.1, Nikkei 225 rose 0.7 percent
Hang Seng contracted 0.6 percent, Shanghai Composite rose by 0.6 percent
Australia’s S&P/ASX 200 gained 0.5 per cent
(Financial Times figures)
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