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

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A comparison of the Federal Reserve’s statements from its two-day meeting that ended Wednesday and its meeting on July 30-31:

ECONOMY:

July: “The (Fed) expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline.”

September: Fed policymakers are worried about higher borrowing rates: “The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labour market.”

FED ACTION:

Then: The Fed “decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”

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

PURCHASES NOT ON ‘PRESET COURSE’:

Then: The Fed policymaking committee “is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labour market or inflation changes.”

Now: Wednesday’s statement makes largely the same point, but more clearly: “Asset purchases are not on a preset course, and the committee’s decisions about their pace will remain contingent on the committee’s economic outlook as well as its assessment of the likely efficacy and costs of such purchases.”

LOOKING AHEAD:

Then: “In determining the size, pace, and composition of its asset purchases, the committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.”

Now: The Fed will focus on recent data: “In judging when to moderate the pace of asset purchases, the (Fed) will, at its coming meetings, assess whether incoming information continues to support the committee’s expectation of ongoing improvement in labour market conditions and inflation moving back toward its longer-run objective.”

FED SAYS PURCHASES HAVE HELPED:

Now: For the first time, the Fed has evaluated its bond-buying efforts: “Taking into account the extent of federal fiscal retrenchment, the (Fed) sees the improvement in economic activity and labour market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy.”

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