Fed Revamps Rates Guidance and Cuts QE to $55 Billion

On March 19th, the Federal Reserve dropped a pledge tying borrowing costs to a 6.5 percent unemployment rate and made clear it would rely on a wide range of measures in deciding when to raise interest rates. The Fed also announced a further $10 billion reduction in its monthly bond purchases. Interest Rate in the United States averaged 6.08 Percent from 1971 until 2014, reaching an all time high of 20 Percent in May of 1981 and a record low of 0.25 Percent in December of 2008. In the United States, the authority for interest rate decisions is divided between the Board of Governors of the Federal Reserve (Board) and the Federal Open Market Committee (FOMC). The Board decides on changes in discount rates after recommendations submitted by one or more of the regional Federal Reserve Banks. The FOMC decides on open market operations, including the desired levels of central bank money or the desired federal funds market rate. This page provides - Fed Cuts QE to $65 Billion Pace - actual values, historical data, forecast, chart, statistics, economic calendar and news. 2014-04-23

Actual Previous Highest Lowest Forecast Dates Unit Frequency
0.25 0.25 20.00 0.25 0.25 | 2014/06 1971 - 2014 Percent Monthly

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Fed Revamps Rates Guidance and Cuts QE to $55 Billion
LIST BY COUNTRY


CALENDAR GMT Country Event Reference Actual Previous Consensus Forecast
2014-03-19 06:00 PM United States
Fed Interest Rate Decision
0.25% 0.25% 0.25% 0.25%
2014-03-19 06:00 PM United States
QE Total
$55B $65B
2014-03-19 06:00 PM United States
QE MBS
$30B $35B
2014-03-19 06:00 PM United States
QE Treasuries
$25B $30B
2014-03-19 06:30 PM United States
Fed Chair Yellen Speaks
2014-03-31 02:55 PM United States
Fed's Chair Yellen Speaks
[+]

Money Last Previous Highest Lowest Forecast Unit
Interest Rate 0.25 2014-03-19 0.25 20.00 0.25 0.25 2014-06-30 Percent [+]
Central Bank Balance Sheet 4198424.00 2014-04-09 4186827.00 4198424.00 672444.00 4346231.61 2014-06-30 USD Million [+]
Foreign Exchange Reserves 145205.00 2014-02-28 144416.00 153075.00 12128.00 145950.83 2014-06-30 USD Million [+]
Loans to Private Sector 7520.25 2014-03-15 7455.06 7520.25 39.00 7563.38 2014-06-30 USD Billion [+]
Money Supply M0 3885850.00 2014-03-15 3833340.00 3885850.00 40425.00 4043996.71 2014-06-30 USD Million [+]
Money Supply M1 2744.30 2014-03-15 2720.80 2744.30 138.90 2828.48 2014-06-30 USD Billion [+]
Money Supply M2 11158.00 2014-03-15 11127.30 11158.00 286.60 11404.97 2014-06-30 USD Billion [+]
[+]


FED Cuts Bond Buying Program and Changes Forward Guidance

At its March 19th meeting, the U.S. Federal Reserve decided to drop the 6.5 percent unemployment threshold and pledged it would rely on a wide range of measures in deciding when to raise interest rates. The Fed also announced a further $10 billion cut in its monthly bond purchases.

Extracts from the Federal Reserve Press Release:

The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in April, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $25 billion per month rather than $30 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $30 billion per month rather than $35 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.

The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

With the unemployment rate nearing 6-1/2 percent, the Committee has updated its forward guidance. The change in the Committee's guidance does not indicate any change in the Committee's policy intentions as set forth in its recent statements.


Joana Taborda | joana.taborda@tradingeconomics.com
3/19/2014 6:29:05 PM

RECENT RELEASES

Yellen Confirms Fed to Keep Trimming Stimulus
Federal Reserve Chairman Janet Yellen pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps” and pledged that only a domestic slowdown will influence US monetary policy. Published on 2014-02-11

Fed Cuts QE to $65 Billion
The U.S. Federal Reserve on January 29th announced a further $10 billion reduction in its monthly bond purchases sticking to its plan for a gradual withdrawal of unprecedented easing policy. Published on 2014-01-29


Interest Rate | Notes
The interest rate shown on this page refers to the central bank benchmark interest rate. Usually, the central bank benchmark interest rate is the overnight rate at which central banks make loans to the commercial banks under their jurisdiction. Moving the benchmark interest rate, the central bank is able to make an impact on interest rates of commercial banks, inflation level of the country and national currency exchange rate. Reduction of interest rates should bring increase in business activity, a rise in inflation rate and weakening of national currency. In case of increase in interest rates the level of business activity is likely to drop, inflation declines and national currency strengthens.


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