"The
foundations of the Maginot Line were the war cemeteries of France."
Vivian Rowe, The
Great Wall Of France, 1959
Nothing really new in the FOMC statement, but we
have to view this in the light of the shocking revelation from the recently
released Fed Notes that they failed to see the crisis coming even in the days
before the financial system teetered on collapse.
These are old and tired generals, fighting new wars with the old tools and
tactics.
Until the banking system is reformed, the Fed will continue to attempt to
prop it up, and stand by doing little else while the real economy stagnates.
Except perhaps to foment yet another imbalanced, unstable bubble in financial
instruments.
Press Release
Release Date: January 30, 2013
For immediate release
Information received since the Federal Open Market Committee met in December
suggests that growth in economic activity paused in recent months, in
large part because of weather-related disruptions and other transitory
factors.
Employment has continued to expand at a moderate pace but the unemployment
rate remains elevated. Household spending and business fixed investment
advanced, and the housing sector has shown further improvement.
Inflation has been running somewhat below the Committee’s longer-run
objective, apart from temporary variations that largely reflect fluctuations
in energy prices. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee expects that, with
appropriate policy accommodation, economic growth will proceed at a moderate
pace and the unemployment rate will gradually decline toward levels the
Committee judges consistent with its dual mandate.
Although strains in global financial markets have eased somewhat, the
Committee continues to see downside risks to the economic outlook. The
Committee also anticipates that inflation over the medium term likely will
run at or below its 2 percent objective.
To support
a stronger economic recovery and to help ensure that inflation, over time, is
at the rate most consistent with its dual mandate, the Committee will
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. The Committee is maintaining its existing policy of reinvesting
principal payments from its holdings of agency debt and agency
mortgage-backed securities in agency mortgage-backed securities and of
rolling over maturing Treasury securities at auction.
Taken together, these actions should maintain downward pressure on
longer-term interest rates, support mortgage markets, and help to make
broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and
financial developments in coming months. If the outlook for the labor market
does not improve substantially, the Committee will continue its purchases of
Treasury and agency mortgage-backed securities, and employ its other policy tools
as appropriate, until such improvement is achieved in a context of price
stability. In determining the size, pace, and composition of its asset
purchases, the Committee will, as always, take appropriate account of the
likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability,
the Committee expects that a highly accommodative stance of monetary
policy will remain appropriate for a considerable time after the asset
purchase program ends and the economic recovery strengthens. In particular,
the Committee decided to keep the target range for the federal funds rate at
0 to 1/4 percent and currently anticipates that this exceptionally low range
for the federal funds rate will be appropriate at least as long as the
unemployment rate remains above 6-1/2 percent, inflation between one and two
years ahead is projected to be no more than a half percentage point above the
Committee’s 2 percent longer-run goal, and longer-term inflation expectations
continue to be well anchored.
In determining how long to maintain a highly accommodative stance of monetary
policy, the Committee will also consider other information, including
additional measures of labor market conditions, indicators of inflation
pressures and inflation expectations, and readings on financial developments.
When the Committee decides to begin to remove policy accommodation, it will
take a balanced approach consistent with its longer-run goals of maximum
employment and inflation of 2 percent.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman;
William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles
L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C.
Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action
was Esther L. George, who was concerned that the continued high level of
monetary accommodation increased the risks of future economic and financial
imbalances and, over time, could cause an increase in long-term inflation
expectations.
