San Diego, CA  July 25, 2013

An excerpt from the statement released by the Federal Reserve this June 19th says: 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 decided to continue purchasing additional agency mortgage-backed securities at a pace of $ 40 billion per month and longer-term Treasury securities 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 of 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.


This statement reassures investors that the Fed is not planning to cut the bonds buying part of the program, which was what many mistook an earlier statement to mean and which subsequently caused the rapid rate increases. The statement goes on to ensure that this will not be a decision that happens over night: 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.


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