(AP:WASHINGTON) Below is the statement the Fed released Wednesday after its policy meeting:
Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year.
Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and 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 economic growth to remain moderate over coming quarters and then to pick up very gradually.
Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
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 expects to maintain a highly accommodative stance for monetary policy.
In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions _ including low rates of resource utilization and a subdued outlook for inflation over the medium run _ are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less.
This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. 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.
The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.
The classic model of spending one's way out of a recession no longer being palatable to the radical right (if it ever was, but now that these boys have a half-Nelson on the rest of Congress so have effectively been able to sabotage the president's mandate for a Keynesian recovery strategy ), the only tweak that might actually help is to reassure the business community by keeping interest rates rock-bottom low for a meaningfully long time into the future that businesses can depend on. This is, as other writers above have observed, not much of a strategy; but it is the only one that the seditious al-TEAda gang and their Congressional lackeys have left as an option.
The truth of it is that although Obama headed off a true recession -- one brought on by the very sort of speculative bubble-bath we saw artificially inflate the silver market last year to Hunt Brothers-era highs (a great nuisance to those of us who actually make our living by making things from this metal) -- the problem is endemic to an economic regime that is predicated on constant growth and increasing consumption, without end. This is ludicrous on its face, and the marvel is not that Britain may see $11/gal. gasoline but that it is no more costly than that everywhere, especially given that fossil fuels are not merely a finite resource but one that is being extracted with increasing collateral damage to the environment (shale fracking? You ain't seen nothing yet). Ultimately one must wake up to the fact that global capitalism as currently practiced is a colossal fraud, and moreover a distraction from the very real problems of an overpopulated planet whose large-brained dominant primate species somehow has figured out how to use those brains to come up with a viable strategy for ramping down per capita consumption and negative birthrate.
It is conceivable that homo sapiens will survive the coming century. If so, it will do so in much smaller numbers -- four billion may have been a sustainable population when oil was plentiful a half-century ago but I'm guessing more like 1 to 2 billion in a post-petroleum world -- and with an economic system that is much less volatile, capricious, and predatory than our present corporate capitalist regime. That we shall arrive there is inevitable: war, famine, and/or pestilence will do this nastily if we do not begin now to adopt a massive and effective worldwide one-child mindset and reconfigure our economic worldview to work within a century of economic contraction. What saddens me about all the whingeing I see over Bernanke's modest attempt to keep the American economy from a deeper recession is that it is so myopic. In the words of a sometime colleague of mine, "The Titanic's going down, and these guys are sitting around tapping their pencils." Well, some people at least see that there are icebergs dead ahead. But I get the impression that an awful lot of people still somehow believe that the best strategy is full speed ahead and ram the suckers. This, in my view, is a profound error. The sooner we begin ratcheting down to a postcapitalist economy that doesn't require us to keep having all those babies, the more likely it is that we can extricate ourselves from the larger threats facing the planet before Mother Nature chooses her own way, red in tooth and claw.
0% to infinity and beyond!
This will continue as long as those in control can keep manufacturing trillions of electronic dollars out of thin air. Sooner or later, the rest of the world will organize a revolt that will culminate in the end of the US dollar as the global reserve currency. The practical manifestation of this will be that OPEC starts accepting other currencies in exchange for oil.
At that point, deflation in the US will no longer be a problem.
One thing that should always be kept in mind is the old adage: "Figures can lie and liars can figure". This certainly applies to various departments of our Federal Government and to The Fed itself. It was by no "accident" or "off -the-wall" idea that The Fed made the conscious decision a number of years ago to change the formula for calculating inflation. Since the resulting number determines any COLA (cost of living adjustment) how better to save the government some serious bread than by excluding from the formula items literally everyone uses big time and which we see as potential high risks for inflation? So, they eliminated two "minor" items. Let's see what would be REALLY minor in America? hmmmm. Oh, I know. How about we take FOOD AND ENERGY out of the equation. POOF!!! Done. And, The Fed can consistently report inflation as moderate, minor, on inconsequential. (They still have to usually look away from the camera when they do this, lest they totally break up laughing). So, haven't we all been blessed over the past few years to have inflation so "under control" as to be of no real concern.....I mean what? 2 - 3 %? What's THAT? Then you look at meat in the past year....up 33%. hmmm. THAT is WAY out of the 2 - 3% "box". Good thing they took that OUT of calculations. I could be getting depressed. Oh, a lot of those pesky grains used in various food products (and animal feed....[see beef prices] up, in some cases nearly 70%. And, of course, there is that energy thing....OIL, the product the left loves to hate. Nasty stinking oil....that, ever since its discovery that FUELED that little thing called "THE INDUSTRIAL REVOLUTION" and put America on the map, created a Middle Class, and took 90+% of us off the farms and allowed the few percent who remained to outproduce the 90% that once busted their tails thereon. It's a good thing that that mindless rabble, the hopelessly, deliberately, and successfully "Dumbed Down " American voter (product of public education and the American college classroom (the only bastion of communism left following the fall of the wall and The Soviet Union) so easily fell for the siren call of the Democrats in the summer of 2006 when they changed their strategy to name-calling the Bush oil family and Cheney (former head of oil service provider Halliburton) for giving us poor Americans those terrible oil prices approaching $ 2.00/gal. (You now refer to those prices as "THE GOOD OLD DAYS") So, they promised us a return to "reasonable gas prices approaching a buck a gallon IF we would just give the Dems control of BOTH houses of Congress." And, like lemmings, we did. And they promptly drove prices to substantial new HIGHS not those old lows BUT did we hold any of them accountable? of course not. Hey, remember the only thing shorter than the memory span of an American voter is the life of a fruit fly...roughly 24 hours. I've always said, "If you want to get elected to office in America, rob a bank in May and get caught and your face and name splattered through the media. By November, your crime will've been forgotten, but they will recognize your name and picture. You may end up serving from a cell, but you will be elected and, after all, is there anything ELSE that matters? 'Course not.....until REelection. Barack (I never met an unborn human I wouldn't kill or a drilling rig I wouldn't shut down) Obama took office with gas at $ 1.89....and on an agenda that included going after those greedy oil men. He and his Dems screwed up Wall Street and banking even worse with some of their "fixes" but failed to do the ONE THING that would've made sense, had a real impact, and been the "RIGHT THING" to do: BAN the practice of NAKED SHORTING of OIL (and other) FUTURES. OIl prices are largely the product of unbridled greed and collusion between SPECULATORS. Forget Iran. They prey upon your ignorance with fear OVER Iran that could (but hasn't) materialized, but they have driven prices 20-30% repeatedly using our ignorance and panic against us and because THEY CAN because THEY ARE ALLOWED TO. Since Congress, we learn, can routinely conduct "Insider Trading" while cashing oil checks, a tiny fraction of such acts being all that was required to move Martha Stewart to tips on dressing up your flippin' CELL, does anyone question WHY oil prices do what they do? Obama stands before groups and tells such bold faced lies that would get anyone else impeached, tarred and feathered, but him applause by the ignorant. He tells us, without blinking that we have less than 5% of the world's oil reserves when we have, in the past 10 years, discovered more oil ON SHORE HERE than in the entire Middle East combined. But, are we really tapping it, or our off shore, the way we could? Of course not. He uses the EPA to shut down an entire industry...COAL. Why? Because he and they don't like it. They plan to shut down 5 major coal fired power plants along the Ohio River which will further kill the "rust belt industries" and produce rolling brown and blackouts and heighten unemployment. And the communist/socialist lemmings cheer. Under Obama, gas prices at the pump more than doubled. "OH" you say, "But they're coming down now". Wes they are, boys and girls. And, they will likely go lower BECAUSE....they CAN and it is an election year,, and Obama is COUNTING ON that whole "fruit fly memory thingy" to work its magic again. Just remember, his commie-loving Energy Czar is on record WANTING TO GET U.S. GASOLINE PRICES TO THOSE OF EUROPE (but is also on record as NOT OWNING A CAR.) As of two weeks ago, a Brit from Liverpool, UK told me gas there was $ 11.00 a gallon. But, don't worry, SHUT UP, STOP THINKING, DRINK THE DARNED KOOL-AID and RE-elect the man who would be king.
Well said William
The the high oil prices are no different than the animal spirits that drove up AAPL and others, if I'm wrong than we need to credit the speculators with the current low of natural gas, and the future low oil as it revisits the $20's
You're post was a good read, thank you
Decline, not declining growth. Otherwise known as a depression.
This is so goofy! Long term rates are already at all-time lows yet the economy continues to slow. Don't the clowns at the Fed realize they are bucking the headwinds of a massive demographic change and that nothing they do will have any effect whatsoever? We are in for many years of slow or no growth with bouts of declining growth mixed in.
Deflation is heading our way.
FED ones again delivered Some more cosmetic changes, rather then any strong harsh and firm steps.
When LT Bond swep against ST bond, it is said for interest rate reduction purpose, however, any policy maker had ever think that thay are just inviting future problems to arrive more earlier??????
Policy makers world wide, just playing around theaoraticale principales of economics, thay never think about some non-conventional never before type actions, and unless and otherwise, fiscal crisis will lasting untill ultimate system failoure, when there will be not even chance to take any sort of further actions.
And finaly, it is a time to search that advocates of moderen Economy Principals, crying about "Auto Currect mechanisum" wher are thay now????
Rasesh Shukla - Idia
C, you are exactly right. The Fed is more worried about Deflation than anything else right now. Have they ever in the past history made statements like "We will keep the interest rates low through 2014"? The markets were always on pins and needles from one fed meeting to the next. Now they have a two year projection? OMG!
It' cracks me up, nobody wants to use the D word, (deflation) it's just "less inflation"
LOL, the Gov't thinks it can control the Free Market Economy. We'll see who wins out the day in the end. The Command Economy!