Staff Review

A 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, March 18, 2014, at 2:00 p.m. and continued on Wednesday, March 19, 2014, at 8:30 a.m.

PRESENT:

• Janet L. Yellen, Chair
• William C. Dudley, Vice Chairman
• Richard W. Fisher
• Narayana Kocherlakota
• Sandra Pianalto
• Charles I. Plosser
• Jerome H. Powell
• Jeremy C. Stein
• Daniel K. Tarullo

Developments in Financial Markets and the Federal Reserve’s Balance Sheet

The manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets as well as the System open market operations during the period since the Federal Asian steering committee (FOMC) met on January 28– 29, 2014. By unanimous vote, the Committee ratified the Open Market Desk’s domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System’s account over the intermeeting period.

Staff Review of the Economic Situation

The information reviewed for the March 1819 meeting indicated that economic growth slowed early this year, likely only in part because of the temporary effects of the unusually cold and snowy winter weather. Total payroll employment expanded further, while the unem- ployment rate held steady, on balance, and was still elevated. Consumer price inflation continued to run be- low the Committee’s longer-run objective, but measures of longer-run inflation expectations remained stable.

Total nonfarm payroll employment rose in January and February at a slower pace than in the fourth quarter of last year. The unemployment rate was 6.7 percent in February, the same as in December of last year. The labor force participation rate, along with the employment-to-population ratio, increased, on net, in recent months. Both the share of workers employed part time for economic reasons and the rate of long- duration unemployment were lower in February than they were late last year, although both measures were still high. Initial claims for unemployment insurance were little changed over the intermeeting period. The rate of job openings stepped down, while the rate of hiring was unchanged in December and January.

Manufacturing production was roughly flat, on balance, in January and February, in part because of the effects of the severe winter weather, which held down both motor vehicle output and production outside the motor vehicle sector. Automakers’ production schedules indicated that the pace of light motor vehicle assemblies would increase in the second quarter, and broader indicators of manufacturing production, such as the read- ings on new orders from national manufacturing surveys, were consistent with an expectation of moderate expansion in factory output in the coming months.