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Tuesday, January 4, 2011

Federal Reserve Releases December FOMC Minutes (Video) *USA economic recovery not decreasing unemployment*

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Marriner S. Eccles Federal Reserve Board Building in Washington, D.C.


Federal Reserve Releases December FOMC Minutes
Previous Statement: USA Economic Recovery Insufficient to Decrease Unemployment

FOMC Minutes The Federal Open Market Committee has released the December 14, 2010 minutes. A statement was issued on  Tuesday, December 14, after the two day meeting on monetary policy. The statement is included lower on this page and is reviewed here [Federal Reserve: USA Economic Recovery Rate Insufficient (GDP Chart) *Not decreasing unemployment*].

Overall the FOMC stated on December 14, "economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment" and repeated the November 3 statement, "Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow." A video is below that reviews and hashes out some of the nuances of the released December 14 minutes. Of note is that the Fed's quantitative easing, aka QE2, will continue as more time and economic data is needed to to determine a point to halt or change QE2.

CNBC "Economic Recovery Not Strong Enough to Alter Stimulus: Fed" Fed officials in December felt the US economic recovery wasn't strong enough to change the $600 billion bond-buying program known as quantitative easing, Fed minutes released Tuesday showed. The CNBC news team and Jim Bianco of Bianco Research weigh in.




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Federal Open Market Committee Statement

Federal Open Market Committee
Release Date: December 14, 2010
For immediate release

Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

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 for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

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

Voting against the policy was Thomas M. Hoenig. In light of the improving economy, Mr. Hoenig was concerned that a continued high level of monetary accommodation would increase the risks of future economic and financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.


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