The Fed Now Playing by Its Own Rule

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Patrick Brennan @ The Corner:

The Federal Reserve’s Open Market Committee made a dramatic announcement today, going further than its October statement, in which it declared that it would keep rates low through mid-2015, and continue quantitative easing until it determined that economic conditions improve significantly. Now it’s put a rule on that:

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 will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. . . .

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee views these thresholds as consistent with its earlier date-based guidance.

This development of a rule-based economic policy is quite significant

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Curt served in the Marine Corps for four years and has been a law enforcement officer in Los Angeles for the last 24 years.

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