Fed Sees Economy Beginning to Strengthen

Today, the Federal Reserve’s Federal Open Market Committee (FOMC) left interest rates unchanged. However, the statement explaining its decision indicated that the Federal Reserve now sees the economy in its early stages of strengthening. The Fed has also taken a slightly more robust perspective on near-term economic growth, shifting its language from “a gradual resumption of sustainable economic growth” to “a strengthening of economic growth.” In addition, the FOMC somewhat toned down the language on the Fed’s efforts to promote an economic recovery and maintain price stability. With respect to its extraordinary programs, the Federal Reserve remains on course to end its purchases of Treasury securities in October. In addition, it will extend its purchases of agency mortgage-backed securities and agency debt through the first quarter of 2010. However, it will not expand those programs beyond the earlier announced parameters. The extension of the period during which the Fed will be purchasing such securities has likely been implemented to avoid a sharp cut off of the program.

The following tables compare the FOMC’s August 12 and September 23 monetary policy statements so as to show the continuing evolution of the Fed’s thinking:







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