The Federal Reserve’s policy setting Open Market Committee just concluded its two-day meeting. Existing policy will continue. But reading between the lines is instructive. Here are the key sentences from its statement:
“Indicators of labor market conditions have shown some further improvement, but the unemployment rate remains elevated.” Translation: It will be years before we recover the jobs and job growth lost from the recession. We’re doing all we can. Smile.
“Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months.” Translation: Not all these critters carry equal weight. Household spending is partly being sustained by a continued unhealthy rise in consumer credit. Fixed investment isn’t causing much hiring when we compare this stage of the recovery to others. And housing has become so vital that slowing is a big deal.
“Fiscal policy is restraining economic growth.” The obsession with both the administration and Congress with austerity is one of the biggest factors holding back job creation. Worse, the tea-party shutdown and game of default chicken proved both costly and dangerous.
“…inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.” Translation: The contraction hangover from the Great Recession continues. All the hysteria about debt and runaway inflation — which unfortunately guides fiscal policy — has proved to be incorrect.
“Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.” Translation: Bernanke held a strong coalition of eight FOMC governors to hold the line against tapering. Among them: His nominated successor, Janet Yellen.
And Don’t Miss: Cash for clunkers, an evaluation of the program | Brookings Institution
Today’s Econ Haiku:
Is there a Plan B
As McBoeing shifts elsewhere?
Maybe Condit knows