Thursday, April 26, 2012

The Fed Speaks

The Federal Reserve Open Market Committee released the minutes of its latest meeting yesterday, and has so often been the case lately, it has decided to do... nothing. No more large-scale purchases of Treasury bonds were announced, and interest rates will stay at their near-zero levels for the time being.

There were two forecasts that came out of the meeting, though, that might have some significance for investors and some impact on the larger economy. First of all, a plurality of the members of the Fed now agree that interest rates are likely to be hiked again sometime in 2014.

Secondly, the predictions for the unemployment and inflation rates - the two elements of the Fed's twin mandate - were tweaked. In January, the Fed had predicted that unemployment would be between 8.2 and 8.5 percent at year's end; now, that same forecast is down to 7.8 and 8 percent. The year-end inflation rate, pegged at 1.4 to 1.8 percent in January, has been revised upward to 1.9 to 2 percent. 

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