The Washington Independent
The Washington Independent

Fed Announces Moderate Policy Change to Boost Recovery

Last updated: 07/31/2020 08:00 | 08/10/2010 11:46
news
Gordon Dickerson

In a new Federal Reserve policy statement, the Federal Open Market Committee said that the pace of recovery has slowed. Conditions have deteriorated, unemployment remains high, bank lending has contracted and things will get better at a “more modest” pace than expected. It is the least optimistic statement this year.

Therefore, the Fed says, it plans to use proceeds from its enormous mortgage-bond portfolio to purchase long-term Treasury securities. In layman’s terms: To boost the recovery, the Fed will keep its balance sheet enormous and stable by reinvesting funds in Treasury securities rather than letting its books winnow down. (See an overview of the policy mechanisms Fed officials might have adopted here.)

Here is the full text of the note:

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

Measures of underlying inflation have trended lower in recent quarters and, with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

**To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.**The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and limits the Committee’s ability to adjust policy when needed. In addition, given economic and financial conditions, Mr. Hoenig did not believe that keeping constant the size of the Federal Reserve’s holdings of longer-term securities at their current level was required to support a return to the Committee’s policy objectives.

Gordon Dickerson | Gordon Dickerson is the founder of J.C.H, a one-person company that helps employers with resumes, cover letters, bios, LinkedIn profiles, and other employment-related documents. John also provides career coaching and advice on how to follow up on resumes, and he will also link clients with recruiters in their field. Gordon 's inherent passion for working with people and counseling them on their careers led him to extend his services to include career coaching, which he has been happily doing since 2008.

Related

E-Verify Mandate Begins Today

The Obama administration today begins implementation of a new mandate to require all federal contractors to check the legal status of their employees to confirm

EPA Administrator Addresses Concerns About Oil Spill Waste Management

At a hearing of the national oil spill commission today, Environmental Protection Agency Administrator Lisa Jackson addressed concerns about waste disposal from

EPA administrator defends allowing Florida to write its own water pollution rules

The EPA seal (Pic via sentryjournal.com) The Environmental Protection Agency has come under fire for its decision to allow the state of Florida to write its own water pollution rules (known as “numeric nutrient criteria”). EPA Regional Administrator Gwendolyn Keyes Fleming is now firing back, writing that the Agency commends the state Department of Environmental Protection for its draft of a proposed standard. A host of environmental groups filed suit in 2008, seeking to compel the EPA to implement a strict set of water pollution standards in Florida, arguing that the state was in violation of the Clean Water Act.

EPA administrator fires back at critics in op-ed

EPA Administrator Lisa Jackson (Pic by USACEpublicaffairs, via Flickr) EPA Administrator Lisa Jackson penned a new op-ed for the Los Angeles Times , criticizing House Republicans desperately seeking to undermine the authority of the agency they have dubbed a “job killer.” Arguing that the environment affects red states and blue states alike, Jackson writes that “it is time for House Republicans to stop politicizing our air and water.” As head of the Environmental Protection Agency, Jackson has faced harsh criticism from House Republicans and GOP presidential candidates who say the agency’s regulations are an undue burden on businesses that have to cut jobs simply to comply with clean water and air rules. Presidential hopeful Michele Bachmann  has pledged to end the EPA if she takes office. “Since the beginning of this year, Republicans in the House have averaged roughly a vote every day the chamber has been in session to undermine the Environmental Protection Agency and our nation’s environmental laws,” writes Jackson.

EPA administrator says federal nutrient criteria is a ‘myth’

In testimony given late last week, EPA Administrator Lisa Jackson said that false accusations about her agency’s numeric nutrient criteria to govern Florida waterways are proving to be a detriment to their implementation. # Testifying before the House Agriculture Committee, Jackson said her agency’s work was often “mischaracterized” and addressed several myths surrounding its work

EPA Analysis Says Climate Bill’s Cost for Households Would Be ‘Modest’

All the attention on the energy front today is going to the BP spill, but the Environmental Protection Agency quietly released its long-anticipated analysis of

EPA announces hold on nutrient standards if Florida can come up with own criteria

The EPA announced today that it is now prepared to withdraw a portion of its proposed numeric nutrient criteria (a set of standards governing water pollution in inland waters) and delay the portion related to estuarine waters, to allow the state Department of Environmental Protection to develop its own criteria. # From a statement released by the EPA earlier today: # EPA recognizes that states have the primary role in establishing and implementing water quality standards for their waters. Therefore, EPA is prepared to withdraw the federal inland standards and delay the estuarine standards if FDEP adopts, and EPA approves, their own protective and scientifically sound numeric standards

EPA biologist says fracking may be partly to blame for West Virginia fish kill

New documents obtained by an environmental news service show that an EPA analyst believes that wastewater from fracking may be partly responsible for a fish kill in a West Virginia river. Scientific American reports : U.S

EPA: BP Has 24 Hours to Find a Less Toxic Chemical Dispersant

Thought the massive quantities of oil pouring into the Gulf of Mexico were the only major threat to the country’s southeast coastal waters right now? Think

EPA and California Near Deal on Fuel Efficiency Standards

Two weeks ago, the Obama administration raised fuel efficiency standards by an average of two miles per gallon -- a modest change that disappointed some

© Copyright 2021 The Washington Independent All Rights Reserved

Terms & Privacy | twi.news@washingtonindependent.com