• By
  • Phil Izzo


There were a lot of changes in the statement as the Fed altered its forward guidance for interest rates. The first was seen in the second paragragh, where the Fed drops an explicit reference to the unemployment rate and move to the more general “labor market conditions.”

The fifth paragraph is where the new forward guidance takes over. The mention of 6.5% unemployment is gone, but the Fed retains the language that it will be looking at “measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.” It now says that rates will remain low for “a considerable time after the asset purchase program ends.”

That is another change in the statement. The taper continues with the Fed cutting asset purchases by another $10 billion to $55 billion a month.

Elsewhere, the assessment of the economy is altered a bit, as the Fed admits the economy “slowed during the winter months” but blames the weather at least partly.

Finally, Narayana Kocherlakota dissented from the vote from the dovish side, objecting that the Fed’s language should indicate its desire to return to 2% inflation.





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