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19 Feb 2014
FOMC Minutes: Hawkish Fed to change guidance as jobless rate falls
FXStreet (San Francisco) - The latest FOMC minutes show that the Federal Reserve is pretty confidence about the US economic momentum as the growth exceeded the FOMC participants forecast in the 2H of 2013. In this line, the Fed would change guidance in the upcoming months.
The taper talk dominates the last meeting as the Fed reached an agreement on the need to continue the taper. However, 'a number of officials said taper should be changed too if economy slowdown. Participants see risks on inflation and a couple of them see chances of rate hikes "relatively soon," let's say before middle of this year.
Key quotes:
The Fed expects the US economy to expand at a moderate pace. "The staff continued to project that real GDP would expand more quickly over the next few years than in 2013 and that real GDP would rise faster than potential output."
Unemployment rate was expected to decline gradually, reaching the staff's estimate of its longer-run natural rate in 2016.
The staff continued to forecast that inflation would run well below the Committee's 2 percent objective early this year but above the low level observed over much of 2013.
The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."
The taper talk dominates the last meeting as the Fed reached an agreement on the need to continue the taper. However, 'a number of officials said taper should be changed too if economy slowdown. Participants see risks on inflation and a couple of them see chances of rate hikes "relatively soon," let's say before middle of this year.
Key quotes:
The Fed expects the US economy to expand at a moderate pace. "The staff continued to project that real GDP would expand more quickly over the next few years than in 2013 and that real GDP would rise faster than potential output."
Unemployment rate was expected to decline gradually, reaching the staff's estimate of its longer-run natural rate in 2016.
The staff continued to forecast that inflation would run well below the Committee's 2 percent objective early this year but above the low level observed over much of 2013.
The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."