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FOMC March meeting stated interest rate increase in 2015
Gold and equities market sold off slightly after Fed Chair Janet Yellen stated asset purchases would decline by $10 billion a month in April and the FMOC would probably begin a slow increase in interest rates in May, 2015.
The FMOC is removing its 6.5% unemployment threshold and replacing it with a more comprehensive approach. The Fed will look at annual hourly employment rates, labor participation and a 2% inflation threshold before raising interest rates.
Because the economy has gone through a stressful period the Fed will not raise interest rates until at least 6 months after employment reaches normalization rates of approximately 5.5% and as long as inflation remains anchored below 2%.
During the first quarter of 2014 the economy appears to have slowed somewhat because of severe winter weather. If the economy does not continue to increase in the Spring of 2014 the Fed would consider a pause in the decline of asset purchases. The Fed has no set path and future plans will be data dependent. The Fed will not only look at a decline in unemployment numbers but will also keep a close watch on its dual mandate of sufficient growth. If inflation declines below the Fed’s target range the FMOC will respond with appropriate action.
For more information on the Federal Reserve and the clash of worldviews see:
Dr. Stephen Johnston
Page Updated Last on: Mar 20, 2014