No new news is good news. That is what we got from the
Fed's FOMC meeting today
In its published work and in the press conference that
followed, nothing was stated to imply a change in current Fed
strategy. In response, stock markets didn't move much. The
Fed Chairman stated we are 'some distance' from too high stock
The Fed statement said the economy returned to 'moderate
growth following a pause late last year'. They shaved down
their optimistic forecast on 2013 and left the 2014 outlook
basically alone. Effects of U.S. budget cuts and global
growth headwinds were factored into both years.
closet good news for the stock market may be the scaled down
2013 GDP outlook
. It means the growth outlook is not scaring them into
tapering down bond buying.
The new Fed outlook took real GDP growth in 2013 down to a
+2.3% to +2.8% number; now in line with private consensus
forecasts. Its 'long-run' real GDP growth rate was pegged
to between +2.3% and +2.5% annually.
The Fed announced $85B a month in bond buying for the
foreseeable future, until it sees 'sustained improvement' in the
jobs market and other demand indicators. The 6.5% unemployment
rate threshold (not trigger) was stated explicitly, and the Fed
Chairman said the current rate at 7.7% 'remains elevated'.
Inflation was seen as 'relatively low'. Short-term rates
are not to rise until 2015, and probably not until the latter
half of that year.
These Fed actions support the 'continued progress' in the
Talk about Europe came about in the press conference.
The Chairmen said he thought Cyprus is not a 'major risk' to the
U.S. The published statement spoke on 'down-side risks to the
outlook'. They have their eyes on Europe.
Kansas City Fed Governor Esther George was the dissenter in
January and in February, once again. She was still worried
about effects of Fed bond buying producing 'financial
instability', in a reach for yield.
What are your thoughts on this important set of
news? Please share them below.
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