Redacted Version of the January 2015 FOMC Statement
December 2014 | January 2015 | Comments |
Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace. | Information received since the Federal Open Market Committee met in December suggests that economic activity has been expanding at a solid pace. | Shades GDP up. This is another overestimate by the FOMC. |
Labor market conditions improved further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. | Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. | Shades their view of labor use up a little. More people working some amount of time, but many discouraged workers, part-time workers, lower paid positions, etc. |
Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. | Household spending is rising moderately; recent declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow. | Interesting how falls in energy prices are treated as permanent by the FOMC, while rises are regarded as transient. |
Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices. Market-based measures of inflation compensation have declined somewhat further; survey-based measures of longer-term inflation expectations have remained stable. | Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable. | Shades their forward view of inflation down. TIPS are showing slightly lower inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is near 2.03%, only down 0.04% from December. |
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. | Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. | No change. Any time they mention the “statutory mandate,” it is to excuse bad policy. |
The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators moving toward levels the Committee judges consistent with its dual mandate. | The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. | No change. They are no longer certain that inflation will rise to the levels that they want. |
The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced. The Committee expects inflation to rise gradually toward 2 percent as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely. | The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely. | CPI is at 0.7% now, yoy. They shade up their view down on inflation’s amount and persistence.Okay, so here they regard the energy price declines as transitory. |
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. | To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. | No change. Highly accommodative monetary policy is gone – but a super-low Fed funds rate remains. Policy normalizes, sort of, but no real change. |
Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. | Based on its current assessment, FOMC judges that it can be patient in beginning to normalize the stance of monetary policy. | No change. In other words, we’re on hold until something goes “Boo!” |
The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. | Sentence removed, but I doubt that it means much. | |
However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated. | However, if incoming information indicates faster progress toward FOMC’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated. | Tells us what we already knew. |
FOMC 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. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. | FOMC 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. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. | No change. Changing that would be a cheap way to effect a tightening. |
When FOMC 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. | 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. | No change. |
FOMC currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. | FOMC currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. | No change. |
When FOMC 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. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. | “Balanced” means they don’t know what they will do, and want flexibility. They are not moving anytime soon. | |
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; and Daniel K. Tarullo.Voting against the action were Richard W. Fisher, who believed that, while the Committee should be patient in beginning to normalize monetary policy, improvement in the U.S. economic performance since October has moved forward, further than the majority of the Committee envisions, the date when it will likely be appropriate to increase the federal funds rate; Narayana Kocherlakota, who believed that FOMC’s decision, in the context of ongoing low inflation and falling market-based measures of longer-term inflation expectations, created undue downside risk to the credibility of the 2 percent inflation target; and Charles I. Plosser, who believed that the statement should not stress the importance of the passage of time as a key element of its forward guidance and, given the improvement in economic conditions, should not emphasize the consistency of the current forward guidance with previous statements. | Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. | A congress of doves for 2015.Things will be boring as far as dissents go.We need some people in the Fed and in the government who realize that balance sheets matter – for households, corporations, governments, and central banks. Remove anyone who is a neoclassical economist – they missed the last crisis; they will miss the next one. |
Comments
- Pretty much a nothing-burger. Few significant changes. The FOMC has a stronger view of GDP and Labor, and deems the weak global economy to be a reason to wait.
- Despite lower unemployment levels, labor market conditions are still pretty punk. Much of the unemployment rate improvement comes more from discouraged workers, and part-time workers. Wage growth is weak also.
- Forward inflation expectations have flattened out.
- Has the FOMC seen how low the 30-year T-bond yield is?
- Equities fall and long bonds rise. Commodity prices are flat. The FOMC says that any future change to policy is contingent on almost everything.
- Don’t know they keep an optimistic view of GDP growth, especially amid falling monetary velocity.
- The FOMC need to chop out more “dead wood” from its statement. Brief communication is clear communication. If a sentence doesn’t change often, remove it.
- In the past I have said, “When [holding down longer-term rates on the highest-quality debt] doesn’t work, what will they do? I have to imagine that they are wondering whether QE works at all, given the recent rise and fall in long rates. The Fed is playing with forces bigger than themselves, and it isn’t dawning on them yet.
- The key variables on Fed Policy are capacity utilization, labor market indicators, inflation trends, and inflation expectations. As a result, the FOMC ain’t moving rates up, absent improvement in labor market indicators, much higher inflation, or a US Dollar crisis.
- We have a congress of doves for 2015 on the FOMC. Things will be boring as far as dissents go. We need some people in the Fed and in the government who realize that balance sheets matter – for households, corporations, governments, and central banks. Remove anyone who is a neoclassical economist – they missed the last crisis; they will miss the next one.