In the Fed’s January statement, the FOMC kept rates at 0.25%—a move that was widely anticipated. In August of 2011, the Fed announced that it would keep rates near zero until mid 2013. The Fed revised that on Wednesday, pushing the date out until 2014.
Yet, what may have been more interesting to investors was the Fed’s guidance for future policy.
The Fed revised its outlook for future US growth lower, dropping its expectations for GDP growth to 2.8-3.2%. The Fed had seen growth of 3-3.5% previously.
The Fed forecast the inflation rate at 1.5-2% for 2012.
For employment, the Fed believed that the jobless rate would come down, although at a slower pace. The Fed expected unemployment to decline to 6.7-7.6% in 2014.
In his subsequent press conference, Chairman Ben Bernanke stated that, while unemployment targeting was largely impossible, the Fed could get a sense for what the natural rate of unemployment was, and could then use policy to go from there. Bernanke stated that the current rate of unemployment was unnaturally high and that there remained room for the Fed to continue to address the problem of unemployment.
