jueves, 19 de diciembre de 2013

jueves, diciembre 19, 2013

December 18, 2013, 2:03 PM

Parsing the Fed: How the Statement Changed

By Phil Izzo
 
    The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Much of the statement remains the same from meeting to meeting. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving. The following tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language. This is the December statement compared with October.





    The big news comes in the third paragraph where the Fed says that it will trim $5 billion from its purchases of Treasurys and $5 billion from its mortgage-backed-securities purchases. And in the fourth graff, the Fed says it “will likely reduce the pace of asset purchases in further measured steps at future meetings.”

    The first two paragraphs lay out its reasoning for the move, as the Fed takes away some of the conditionality around its expectation of continued growth, and now says risks to the outlook are “nearly balanced.”

    However, it further strengthens its language on inflation, saying it is “monitoring inflation developments carefully.” It also adds a sentence that clarifies its 6.5% unemployment rate threshold for beginning to talk about rate increases, adding that it will likely keep rates low past that point, “especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal.”

    Finally, a hawkish dissent was replaced with a dovish one. Boston Fed President Eric Rosengren replaces Kansas City Fed President Esther George as the lone dissenter. Mr. Rosengren preferred to keep bond purchases unchanged.

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