The FOMC released its interest rate and policy decision
statement today alongside updated economic forecasts creating
little news. In fact, the only real news was in the forecasts as
they changed slightly, but the FOMC reiterated its stance to
continue easing so long as the employment market remains
In the FOMC policy statement, the members kept the statement
largely unchanged from the previous meeting. The FOMC reiterated
its stance to continue asset purchases until the labor market
improves and now sees moderate growth in the U.S. The committee
also still sees significant downside risks to the economy and
does not expect to raise rates until 2015.
The only real change in the release was in the economic
forecasts in which the Fed slightly downgraded growth forecasts
on foreign pressures. The FOMC members cut the 2013 GDP forecast
to 2.3-2.8 percent from 2.3-3 percent and cut the 2014 GDP
forecast 2.9-3.4 percent from 3.0-3.5 percent. Also, inflation is
expected to continue to run below the 2 percent target over the
near and medium term.
Fed Chairman Ben Bernanke then took the podium for his press
conference followed by the Q&A session. In his speech,
Chairman Bernanke said that the FOMC is still concerned over
tightening fiscal policy and says purchases will continue to
provide meaningful support. He said that the FOMC had thorough
discussions on the risks and benefits of more easing and also
considered the risks of continuing to funnel profits to the
Bernanke closed by noting that the committee agreed that the
benefits of easing outweighed the risks, in their opinion, and
also noted that crossing thresholds for easing does not
necessarily mean that rate hikes will ensue.
In the Q&A session, Bernanke opened by stating that the
Fed does not have a threshold for the total amount of QE but
plans to adjust the flow rate of purchases, the amount of monthly
purchases, depending on the economy. However, Bernanke noted that
there are no specific levels that will cause changes to the flow
rate and that the decision will be made as a "broad based
Bernanke briefly commented on Cyprus as well, saying simply
that the situation is difficult but that he does not see major
risks to the U.S. economy. He also said that so far, the impact
has not been "enormous."
He also noted that, on the topic of employment, that the
employment economy still is too weak. He noted that the Fed still
needs to be active to lower unemployment and restore health to
the employment economy. However, he also noted that the Fed needs
to weigh the risks of any easing policy against the potential
Bernanke also commented on financial regulation, mainly too
big to fail. He noted that a number of the FOMC members were
concerned about financial stability, especially in the wake of
this potential flare-up in Europe. He also noted that too big to
fail has not been solved, a problem on which he has harped for
One reporter asked Bernanke specifically about the stock
market and if he thought that the market was creating a bubble.
Bernanke responded by saying that he is not measuring success
based on the stock market but that stock price movements were not
out of line with historical price actions. He said that profits
and earnings were not unusual yet.
He lastly noted a new form of policy that the Fed can adopt to
help stimulate the economy. Bernanke believes that the Fed can
adjust the economic indicator thresholds that would be cause to
slow purchases or raise rates as a sign of where the FOMC thinks
the economy needs to be.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Profit with More New & Research
. Gain access to a streaming platform with all the information
you need to invest better today.
Click here to start your 14 Day Trial of Benzinga