April 30 '14 FOMC Meeting

In a Nutshell: "... growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement."

Rate Decision: Fed funds rate maintained at a range between 0% and 0.25%

Quantitative Easing Decision: Bond purchases reduced by $10 billion to $45 billion

The FOMC completed its third of eight annual meetings today and its statement was pretty much what was expected. The members largely discounted the weak first quarter growth rate that was reported in the morning. Instead, they focused on more recent data, which pointed to improving consumer spending even as business investment and housing remained sluggish. Basically, it appears that the Fed members are on the same page as most economists who think we should move on from the essentially flat first quarter GDP report.

Looking forward, there is still concern that inflation remains below desired levels but the belief that conditions would return to normal were still expressed. As a consequence, the Fed felt comfortable enough again to reduce its monthly asset purchases by a total of $10 billion, taking an equal amount out of both mortgage-backed and Treasury securities. The total purchase is down to $45 billion per month and that is likely to be cut at each of the next few meetings despite the Committee's protestations that "asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases".

So, what do we make of the meeting and its aftermath? In one sense, it was nice that the Fed members came to Washington, had a few enjoyable meals together and went home without making any waves. It means that nothing exciting is happening in the economy and given that growth did stall, that is something good to say. The next meeting is June 17-18 and I suspect (if not hope) it will be as uneventful. What I look toward is the July 29-30 gathering. We will get second quarter growth and three more jobs reports and if the economy is looking up as I think, then the forward guidance will be watched really carefully. That meeting may not be a none-event.

Joel L. Naroff is the co-author, with veteran journalist Ron Scherer, of the new book "Big Picture Economics: How to Navigate the New Global Economy".