The main event this week—the Federal Open Market Committee meeting/Ben Bernanke press conference—concluded today. Markets and investors, news casters and financial analysts had built this into the meeting of all meeting, market expectation were high, markets for weeks have been searching for and positioning themselves for more monetary easing. They were sure that the Fed would just give in and change course. Although one never knows what to expect from Mr. Bernanke, you can be sure that he does have a plan and that he is doing his best to guide the US economy to health.
The Federal Reserve says the economy is growing moderately while cautioning that risks from Europe remain. It’s holding off on taking any further steps to boost the recovery.
The dollar pared a decline and Treasury prices reverted back to earlier losses on Wednesday after the Federal Reserve said in a policy statement that market strains are a big downside risk to their outlook for modest economic growth.
The Fed notes in a statement after a two-day meeting that the job market has improved slightly but that unemployment remains elevated. It says the housing market has improved somewhat but remains depressed. And it points to a pickup in inflation but says it should be only temporary.
The Fed stuck with its plan to keep a key short-term interest rate near zero through at least late 2014. It announced no new plans for further bond buying after a current program ends in June.
Mixed economic data has the Federal Reserve sticking to its current game plan for stimulating the recovery.
Following a two-day meeting, the central bank characterized the economy’s current momentum as “moderate,” and said it will not make any changes to its ongoing stimulus programs at this time. According to the official statement:
The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually
The Fed still plans to keep the federal funds rate at record lows “at least through late 2014,” a long-run forecast it first announced in January.
Richmond Fed President Jeffrey Lacker dissented against that language, as he did in the last two meetings. He believes the economy will not need ultra-low interest rates as far out as late 2014.
Meanwhile, the program known as Operation Twist remains in place, shifting $400 billion from short-term to long-term bonds. The hope is that this program, which is scheduled to end in June, will bring down long-term interest rates on items like car loans and mortgages.
Despite the Fed’s best efforts though, the economy remains a mixed bag.