FOMC Monetary Policy Statement Dec 12, 2012

-Oct 24 Statement Follows For Comparison

WASHINGTON (MNI) – The following is the text of the Federal Open Market
Committee’s monetary policy statement released Wednesday. The statement
released after the Oct. 24 meeting follows for comparison:

Information received since the Federal Open Market Committee met in October
suggests that economic activity and employment have continued to expand at a
moderate pace in recent months, apart from weather-related disruptions. Although
the unemployment rate has declined somewhat since the summer, it remains
elevated. Household spending has continued to advance, and the housing sector
has shown further signs of improvement, but growth in business fixed investment
has slowed. Inflation has been running somewhat below the Committee’s longer-run
objective, apart from temporary variations that largely reflect fluctuations in
energy prices. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster
maximum employment and price stability. The Committee remains concerned that,
without sufficient policy accommodation, economic growth might not be strong
enough to generate sustained improvement in labor market conditions.
Furthermore, strains in global financial markets continue to pose significant
downside risks to the economic outlook. The Committee also anticipates that
inflation over the medium term likely will run at or below its 2 percent
objective.

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
will continue purchasing additional agency mortgage-backed securities at a pace
of $40 billion per month. The Committee also will purchase longer-term Treasury
securities after its program to extend the average maturity of its holdings of
Treasury securities is completed at the end of the year, initially at a pace of
$45 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, in January,
will resume rolling over maturing Treasury securities at auction. Taken
together, these actions should maintain downward pressure on longer-term
interest rates, support mortgage markets, and help to make broader financial
conditions more accommodative.

The Committee will closely monitor incoming information on economic and
financial developments in coming months. If the outlook for the labor market
does not improve substantially, the Committee will continue its purchases of
Treasury and agency mortgage-backed securities, and employ its other policy
tools as appropriate, until such improvement is achieved in a context of price
stability. In determining the size, pace, and composition of its asset
purchases, the Committee will, as always, take appropriate account of the likely
efficacy and costs of such purchases.

To support continued progress toward maximum employment and price
stability, the Committee expects that a highly accommodative stance of monetary
policy will remain appropriate for a considerable time after the asset purchase
program ends and the economic recovery strengthens. In particular, the Committee
decided to keep the target range for the federal funds rate at 0 to 1/4 percent
and currently anticipates that this exceptionally low range for the federal
funds rate will be appropriate at least as long as the unemployment rate remains
above 6-1/2 percent, inflation between one and two years ahead is projected to
be no more than a half percentage point above the Committee’s 2 percent
longer-run goal, and longer-term inflation expectations continue to be well
anchored. The Committee views these thresholds as consistent with its earlier
date-based guidance. In determining how long to maintain a highly accommodative
stance of monetary policy, the Committee will also consider other information,
including additional measures of labor market conditions, indicators of
inflation pressures and inflation expectations, and readings on financial
developments. 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.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman;
William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra
Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K.
Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was
Jeffrey M. Lacker, who opposed the asset purchase program and the
characterization of the conditions under which an exceptionally low range for
the federal funds rate will be appropriate.

******************************************************

FOMC Statement From October 24, 2012:

Information received since the Federal Open Market Committee met in
September suggests that economic activity has continued to expand at a moderate
pace in recent months. Growth in employment has been slow, and the unemployment
rate remains elevated. Household spending has advanced a bit more quickly, but
growth in business fixed investment has slowed. The housing sector has shown
some further signs of improvement, albeit from a depressed level. Inflation
recently picked up somewhat, reflecting higher energy prices. Longer-term
inflation expectations have remained stable.

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
will continue purchasing additional agency mortgage-backed securities at a pace
of $40 billion per month. The Committee also will continue through the end of
the year its program to extend the average maturity of its holdings of Treasury
securities, and it 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. These actions, which together will
increase the Committee’s holdings of longer-term securities by about $85 billion
each month through the end of the year, should put downward pressure on
longer-term interest rates, support mortgage markets, and help to make broader
financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and
financial developments in coming months. If the outlook for the labor market
does not improve substantially, the Committee will continue its purchases of
agency mortgage-backed securities, undertake additional asset purchases, and
employ its other policy tools as appropriate until such improvement is achieved
in a context of price stability. In determining the size, pace, and composition
of its asset purchases, the Committee will, as always, take appropriate account
of the likely efficacy and costs of such purchases.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman;
William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra
Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K.
Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was
Jeffrey M. Lacker, who opposed additional asset purchases and disagreed with the
description of the time period over which a highly accommodative stance of
monetary policy will remain appropriate and exceptionally low levels for the
federal funds rate are likely to be warranted.

–MNI Washington Bureau; tel: +1 202-371-2121; email: hscott@mni-news.com

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FOMC Monetary Policy Statement Dec 12, 2012 – Text