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Making a Boring Fed Announcement More Interesting
Wednesday's FOMC Announcement was almost completely unchanged from the previous version. Since the Fed is already in the habit of tweaking only certain sections of certain sentences to evolve the statement over time, here are some ideas for next time:
Information received since the Federal Open Market Committee met in March indicates that growth in economic activity slowed during the (frigid; merciless; polar vortex plagued) winter months, in part reflecting (adverse; Arctic; abysmal) weather conditions. Labor market indicators were mixed but on balance showed further improvement. The (unemployment rate; probability of ineffective Russian sanctions; multi-month length of NBA and NHL playoffs), however, remains elevated. Household spending and business fixed investment continued to advance, while the recovery in the (housing sector; Ukrainian tourist industry; Malaysia Air bookings) remained slow. (Fiscal policy; Donald Sterling's looming fine; Dwindling worker productivity due to on-job Kentucky Derby handicapping) is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable (due to non-existent income growth; as consumers' capital plummets; as newly legalized botanicals' prices fall in CO and WA).
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a (moderate; moribund; morose) pace and labor market conditions will continue to improve (gradually; glacially; galactically), moving toward those the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as nearly (balanced; impossible to accurately predict; equal to the Cubs' World Series hopes). The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to (economic performance; seniors' nearly nonexistent interest income; goods producers' pricing power), and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.
The Committee currently judges that there is sufficient underlying strength in (the broader economy; Kate Upton's unique acting skills; probable expenditures on a $100,000,000 presidential library in Chicago) to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in April, the Committee will (add to; re-taper; pretend it has the funds to expand) its holdings of agency mortgage-backed securities at a pace of $20 billion per month rather than $25 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $25 billion per month rather than $30 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over (maturing Treasury securities at auction; after hitting the snooze alarm daily; any scratch-off lottery ticket winnings). The Committee's (sizable and still increasing; gigantic and growing; broad and burgeoning) holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.
The Committee will closely monitor incoming information on (economic and financial developments; mock NFL drafts; local Cinco de Mayo festivities) in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools (as appropriate; despite Ron Paul's constant consternation; including hiring Committee members' nieces as interns), until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of (asset; single malt scotch; gold and platinum) purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a (highly accommodative; limitless and infinite; unprecedented and unsurpassed) stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress--both (realized and expected; actual and fantasized; potential and improbable)--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments including (Committee stock portfolios; Oregon's $78,000,000 healthcare website repair estimate; Vladimir Putin's net personal worth) . 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 for a considerable time after the asset purchase program ends, especially if projected (inflation; GDP; Congressional approval ratings) continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum (full time; part time; any time) employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the (target federal funds rate; Committee members' personal bond purchases; gratuities at Committee luncheons) below levels the Committee views as normal in the longer run.
With the unemployment rate nearing 6-1/2 percent, the Committee has updated its (forward guidance; resumes for post Committee job searches; support for lifetime jobless benefits). The change in the Committee's guidance does not indicate any change in the Committee's policy intentions as set forth in its recent statements.
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