FOMC says Economy Expanding at Moderate Pace, Employment Growth Still Slow

In its monthly press release, the Federal Open Market Committee (FOMC) said that economic activity has continued to expand at a moderate pace in recent months. While growth in household spending and the housing sector have both shown promise, the labor market as well as fixed investment by businesses have grown more slowly. A growth in energy prices has also pushed inflation somewhat higher, though long-term inflation expectations have remained stable. The FOMC also said that with the current potential downside risks posed by European financial concerns, economic growth may not be strong enough to generate sustained improvement in labor market conditions without sufficient policy accommodation. In order to continue the support of the recovery, the FOMC will continue purchasing additional agency mortgage-backed securities at a rate of $40 billion a month. The committee also stated that they plan on  maintaining a target Federal Funds rate of 0 to 1/4 percent through mid-2015. If conditions do not improve over the coming months the FOMC will undertake additional asset purchases.  The lone dissenter on the committee was Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, who opposed additional asset purchases and disagreed with the description of the time period over which a highly accommodating stance of monetary policy will remain appropriate. This is the seventh consecutive committee meeting in which Mr. Lacker has dissented.

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