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Fed Talk

Fed Talk

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Published by TelegraphUK

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Published by: TelegraphUK on Oct 30, 2013
Copyright:Attribution Non-commercial

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01/29/2015

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Information received since the Federal Open MarketCommittee met inJuly
September generally
suggests that economicactivity has
 
been expanding
continued to expand 
at a moderate pace.Some
 
indicators
Indicators
of labor market conditions have shown
 
some
further improvementin
 
recentmonths,but the unemployment rate remains elevated.
 
 Available data
Household
suggest that household 
spending and business fixed investmentadvanced,
 
and
 while the recovery in
the housing sectorhas been strengthening,
 
but mortgage
slowed 
 
rates have risen further and fiscal
somewhat in recent months. Fiscal
policyis restraining economicgrowth. Apart from fluctuations dueto changes in energy prices,inflation has been running below the Committee’s longer-runobjective, but longer-term inflation expectations have remainedstable.Consistent with its statutory mandate, the Committee seeksto foster maximum employment and price stability. The Committeeexpects that, with appropriate policy accommodation, economicgrowth will pick up from its recent pace and the unemploymentrate will gradually decline toward levels the Committee judgesconsistent with its dual mandate. The Committee sees thedownside risks to the outlook for the economy and the labormarket as having diminished, on net, since last fall
 
, but the tightening of
 
financialconditions observed in recent months, if
 
sustained, could slow the pace of improvement in theeconomy and labor market.TheCommittee recognizes that inflation persistently below its 2percent objective could pose risks to economic performance, butit anticipates that inflation will move back toward itsobjective over the medium term.Taking into account the extent of federal fiscalretrenchment
 
over the past year
, the Committee sees theimprovement in economic activity and labor market conditionssince it began its asset purchase programa year agoas consistent withgrowing underlying strength in the broader economy. However, theCommittee decided to await more evidence that progress will besustained before adjusting the pace of its purchases.Accordingly, the Committee decided to continue purchasingadditional agency mortgage-backed securities at a pace of $40billion per month and longer-term Treasury securities at a paceof $45 billion per month. The Committee is maintaining itsexisting policy of reinvesting principal payments from itsholdings of agency debt and agency mortgage-backed securities inagency mortgage-backed securities and of rolling over maturingTreasury securities at auction. Taken together, these actionsshould maintain downward pressure on longer-term interest rates,support mortgage markets, and help to make broader financialconditions more accommodative, which in turn should promote astronger economic recovery and help to ensure that inflation,over time, is at the rate most consistent with the Committee’sdual mandate.

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