Monday, June 27, 2011

FOMC Statement, Economic Projections, Bernanke's Press Conference (Video-Transcript) - 6/22/2011

Bernanke's Press Conference 6/23/2011
On 6/22/2011, the Federal Reserve released updated economic projections and said in the FOMC statement that the U.S. economic recovery was "continuing at a moderate pace, though more slowly than the Committee had expected" and "recent labor market indicators have been weaker than anticipated. The Fed completes its second round of quantitative easing ($600 billion in Treasury bond purchases) at the end of the month, but will continue to reinvest principal payments from agency debt and agency mortgage-backed securities in Treasury securities. I embedded Bernanke's press conference and transcript as well.

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FOMC Statement on June 22, 2011:
Fed Economic Projections (GDP, Unemployment, PCE Inflation) 6/2011
Information received since the Federal Open Market Committee met in April indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly than the Committee had expected. Also, recent labor market indicators have been weaker than anticipated. The slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions. However, longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated; however, the Committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline toward levels that the Committee judges to be consistent with its dual mandate. Inflation has moved up recently, but the Committee anticipates that inflation will subside to levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipate that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee will monitor the economic outlook and financial developments and will act as needed to best foster maximum employment and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

Source: http://www.federalreserve.gov/newsevents/press/monetary/20110622a.htm

More information on the Treasury purchases from the New York Fed:
June 22, 2011

On June 22, 2011, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk at the Federal Reserve Bank of New York (the Desk) to complete purchases of $600 billion of longer-term Treasury securities by the end of June. The FOMC also directed the Desk to maintain its existing policy of reinvesting principal payments on all domestic securities in the System Open Market Account in Treasury securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion.

Under the existing reinvestment policy, principal payments from agency debt and agency mortgage-backed securities (MBS) are reinvested in longer-term Treasury securities. In implementing this policy going forward, the Desk will follow operating practices similar to those established during the $600 billion Treasury purchase program.

Purchases will be allocated across maturities according to a distribution that is nearly identical to that executed under the Treasury purchase program. The only change to the distribution is that the two maturity sectors beyond 10 years from the earlier purchase program will be combined into a single maturity sector of 10 to 30 years in order to achieve greater operational simplicity. Specifically, the Desk plans to distribute purchases across seven maturity sectors based on the following approximate weights:

Nominal Coupon Securities by Maturity Range* [continue reading: http://www.newyorkfed.org/markets/opolicy/operating_policy_110622.html]

FOMC Economic Projections Federal Reserve 6/22/2011


Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20110622.pdf

Transcript of Chairman Bernanke's Press Conference

Source: http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20110622.pdf


Chairman Ben Bernanke's press conference video via CSPAN.


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