FOMC – The Federal Open Market Committee meets every six weeks to review economic conditions and chart the nation’s economic course.
For a chart showing the health of the nation’s economy, click here and visit the FOMC website
FOMC Meeting – Where are we headed?
Since the April 2011 meeting of the Federal Open Market Committee, economic data suggests that the recovery is moving along, but very slowly.
Although job creation nationwide has fallen short of expected goals, the blame seems to be placed on higher food and energy prices and disruption in world markets from events in Japan.
These things are temporary in nature, and Federal economists expect consumer spending and investment in equipment to continue their expansion.
On the downside, housing and commercial building remains flat and there has been an increase in inflation recently.
Long term inflationary indicators, however remain stable. This recent up trend is seen more as a result of temporary supply shortages and an increase in the cost of imported goods.
The FOMC has a tough job. By statutory mandate they must achieve maximum employment while maintaining price stability. If the unemployment rate drops too much or too quickly, a labor shortage could result which could in turn spark inflation.
If unemployment remains high – or gets much higher – the risk of deflation returns, an even more difficult problem to fix.
As it is now, the FOMC expects the recovery to gain a speed in the months to come, slowly creating jobs and gradually reducing the unemployment rate.
Inflation, although recently moving higher, is expected to abate as energy and commodity return to more “natural” levels. Still, inflation seems to be the most worrisome trend and commands the most attention by the Committee.
It should be noted, however, that although the FOMC decided to maintain the Fed Funds rate at 0% – .25%, it has far more options available to rein in inflation than to spur economic growth through cheaper money.
These are not the only tools available to the Committee, but they are by far the most familiar. In addition, they are not expected to change any time soon.
The Committee will purchase long-term Treasury Securities to the tune of $600 Billion by July 1 and will continue its policy of reinvesting payments from its holdings.
As with the nation, the FOMC will simply have to wait and see what tomorrow brings, then react accordingly.
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