The Fed

On Wednesday, the Federal  Reserve announced that it would stay with the current low interest rates through the end of 2014 but cited a moderately expanding economy and increased unemployment.

From the two-day meeting, the group issues a statement, a From the 10 officials at the two-day Federal Open Market Committee meeting, nine voted to keep the central bank’s money policies the same. The lone dissenter was Federal Reserve Bank of Richmond President Jeffrey Lacker. He voted against the committee’s action because he does “not anticipate economic conditions are likely to warrant exceptionally low levels” of the federal funds rate through late 2014.

Lacker has a pattern of dissenting: he’s done so at the three 2012 FOMC meetings.

This rate vote isn’t anything new as the central bank has held short-term interest rates near zero since December 2008, hoping to induce spending and investment.

Also from the meeting, the group referenced new concerns from overseas financial challenges and softened its stance about the current job market. In addition, they noted an inflation rise but said it should be temporary.

Meeting Statement

A closer look at the meeting statement  didn’t offer an insight whether the Fed will begin a third round of bond-buying or any new  programs to decrease long-term interest rates and move along the economic recovery. In the past, Fed officials have said they’re open to taking additional steps should the economy decline but after reviewing their most recent remarks, it didn’t appear to be on the list to do in the near future.

But a closer look at Wednesday’s statement new concerns about strength of the recovery.

For growth, the group said, “The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. In March: Fed officials had an expectation for “moderate economic growth.”

From Wednesday’s statement, it represented the first opportunity for the Fed to review and adjust its policy after March’s dismal jobs report that had the economy only adding 120,000 jobs following three consecutive months of growth over 200,000. In Wednesday’s statement, it said about the unemployment rate that  it “has declined but remains elevated.” In March, the jobless rate had “declined notably in recent months but remains elevated.”

The strains faced by lobal financial markets “continue to pose significant downside risks to the economic outlook.” In March, they noted the risks had eased.

With higher energy prices came increased pressure on inflation. The statement said, “Inflation has picked up somewhat but the increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily.”

Updated Forecasts

In addition to today’s statement, the Fed also released updated forecasts for the economy and interest rates. They offer a slightly more optimistic view and a little more explanation why policy stayed the same today.

Policymakers are now slightly more upbeat about economic growth than January and now there’s more inflation concern. From the forecasts, 2012 growth has increased to the 2.4 percent to 2.9 percent, higher than the 2.2 percent to 2.7 percent during January’s  projections. The end of year unemployment is expected between 7.8 percent to 8 percent, down from previous estimates of 8.2 percent to 8.5 percent.

Ben Bernanke Press Conference

The third component was the press conference with Fed Chief Ben Bernanke.  Here’s a few highlights per live blogging by The Wall Street Journal.

Q: What most frustrates you about the economic recovery?

A: “It’s been quite slow. Here we are almost three years from the beginning of the expansion” With the unemployment rate over 8 percent, “it has been a very long slog.”

Q:  How did the mild winter affect job growth?

“The weather issue just reflects how difficult it can be to make real-time assessments” on the state of the economy. This probably led to  an unnatural January and February and an unnaturally weak March. He said, “We’re doing our best to try to adjust for that. We’re also looking at some of the seasonality issues” from the 2008 and 2009 recessions.

He added economy needs about 150,000 to 200,000 jobs per month to meet the Fed’s newest forecasts.

Q: Is there a bond bubble?

A: Bernanke said no and that interest rates remain low for many reasons such as monetary policy and the effects of safe-havens. Bernanke said, “Of course interest rates will rise at some point. We hope that they do. … I think it’s important for holders of long-term securities to manage their risks and pay attention to that.”  He noted there are also good reasons for interest rates to currently remain low.