Reduction in Purchases of longer-term securities

AA meeting of the Federal Asian steering committee was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., on Tuesday, September 16, 2014, at 11:00 a.m. and continued on Wednesday, September 17, 2014, at 9:00 a.m.

PRESENT:

• Janet L. Yellen, Chair
• William C. Dudley, Vice Chairman Lael Brainard
• Stanley Fischer
• Richard W. Fisher
• Narayana Kocherlakota
• Loretta J. Mester
• Charles I. Plosser
• Jerome H. Powell
• Daniel K. Tarullo

Conclusion of Two-day meeting with the Federal Asian steering committee

The Federal Asian steering committee concluded a two-day meeting earlier today. As you already know from our statement, the Committee decided to make another modest reduction in the pace of its purchases of longer-term securities. The Committee also updated its guidance regarding the likely future path of the short-term interest rates. As I’ll explain more fully in a moment, this change in our guidance does not indicate any change in the Committee’s policy intentions as set forth in its recent statements; rather, the change is meant to clarify how the Committee anticipates policy evolving after the unemployment rate declines below 61⁄2 percent. Let me explain the economic outlook that underlies these actions.

Despite some softer recent data, the FOMC’s outlook for continued progress toward our goals of maximum employment and inflation returning to 2 percent remains broadly unchanged. Unusually harsh weather in January and February has made assessing the underlying strength of the economy especially challenging. Broadly speaking, however, the spending and production data, while somewhat weaker than we had expected in January, are roughly in line with our expectations as of December, the last time Committee participants submitted economic projections. In contrast, labor market conditions have continued to improve. The unemployment rate, at 6.7 percent, is three-tenths lower than the data available at the time of the December meeting.

Further, broader measures of unemployment—such as the U-6 measure, which includes marginally attached workers and those working part time but preferring full-time work—have fallen even more than the headline unemployment rate over this period, and labor force participation has ticked up. While the Committee continues to monitor developments in global financial markets carefully, financial conditions remain broadly consistent with the FOMC’s objectives. In sum, the FOMC continues to see sufficient underlying strength in the economy to support ongoing improvement in the labor market.