Here comes the latest policy announcement from Ben Bernanke and the Federal Open Market Committee. And the verdict: The central bank’s still in a holding pattern, not quite ready to take further action to stimulate the U.S. economy, but still not ruling anything out for its next meeting in September.
According to its statement, the Fed won’t take any additional steps at the moment to boost the economy. No quantitative easing. No bold nwe statements. No trying to reduce mortgage rates further. The central bank’s forecast of “exceptionally low” interest rates through 2014 remains unchanged from its last report in June:
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates 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 at least through late 2014.
On the other hand, the committee’s statement does note that Fed officials are still poring over recent (and troubling) economic data. Growth has “decelerated” of late, with the U.S. economy expanding at a mere 1.5 percent pace in the second quarter of 2012. And the unemployment rate remains stuck at 8.2 percent. Meanwhile, inflation is expected to remain “at or below” the Fed’s target over the medium term. So is that enough to warrant more stimulus? The FOMC statement says, basically, ask us when we meet again in September:
The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
Fed officials will meet again on September 12 and 13. Expectations are a bit higher for that meeting: A recent Bloomberg poll of economists found that most thought the Fed would announce some sort of quantitative easing—say, buying up $600 billion of government and housing debt—next time around.