Federal Reserve Holds Steady on Fiscal Stimulus

The Federal Reserve Building - Washington DCThe Federal Reserve revealed earlier today that they are planning on continuing their $85 billion per month in bond purchases for the time being.

According to the official statement from the Fed, "the Committee 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."

While the FOMC elected to continue the $85 billion/month fiscal stimulus for the time being in a 10-2 vote, they did say that the "downside risks to the outlook for the economy and the labor market" have "diminished" since the fall.

In regards to the labor market, the FOMC said that "labor market conditions have shown further improvement in recent months, but the unemployment rate remains elevated." The national unemployment rate in the United States currently sits at 7.6% and has not been under 7% since November of 2008.


The Fed also changed some of their outlooks, including:

-2013 GDP outlook narrowed to 2.3%-2.6% from 2.3%-2.8$

-2013 inflation outlook lowered to 0.8%-1.2% from 1.3%-1.7%

-2014 GDP outlook changed to 3.0%-3.5% from 2.9%-3.4%

-2014 unemployment outlook changed to 6.5%-6.8% from 6.7%-7%


According to Fed Chairman Ben Bernanke, the Federal Reserve will likely moderate their asset purchases later in the year if economic data comes in as expected. This moderation would continue into 2014, where it is expected that the asset purchases will cease altogether, barring some unexpected downtick in the economy.

Source: FederalReserve.gov - Press Release

Filed under: General Knowledge

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