A look at how the Fed’s views have changed on interest rates, bond purchases

The Associated Press 0

A comparison of the Federal Reserve’s statements from its two-day meeting that ended Wednesday and its meeting Oct. 29-30:

BOND PURCHASES:

October: The Fed “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

December: Fed policymakers have cut back on their $85 billion bond purchase program: “In light of the cumulative progress toward maximum employment and the improvement in the outlook for labour market conditions, (policymakers) decided to modestly reduce the pace of its asset purchases.”

INTEREST RATES:

Then: The Fed decided to keep its target for the short term rate it controls between 0 and 0.25 per cent and “currently anticipates that this exceptionally low range … will be appropriate at least as long as the unemployment rate remains above 6.5 per cent.”

Now: The Fed expects to keep rates lower for longer: The Fed “now anticipates … that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5 per cent.”

MORE TAPERING LIKELY:

Then: “Asset purchases are not on a preset course, and … decisions about their pace will remain contingent on the (Fed’s) economic outlook.”

Now: If the job market continues to strengthen and inflation moves back toward 2 per cent, the Fed “will likely reduce the pace of asset purchases in further measured steps at future meetings.”

INFLATION:

Then: The Fed “recognizes that inflation persistently below its 2 per cent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”

Now: Fed policymakers are paying closer attention: “(The Fed) recognizes that inflation persistently below its 2 per cent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.”

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