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The Federal Open Market Committee took no new action at its March 19-20 meeting. No new action was expected today as the Fed continues its bond buying program, dubbed QE3. The FsayaC noted that economic activity has continued to expand at a moderate pace in recent months, which has led the unemployment rate to improve. Despite the improvements the unemployment rate remains elevated.

QE3 currently adds $85 billion to the Fed’s balance sheet each month. The $85 billion each month is comprised of $40 billion in agency mortgage-backed securities purchases and $45 billion in long-term Treasury securities purchases. In his press conference Chairman Bernanke noted that the amount of the purchases may vary in the future depending on economic conditions. He noted that although we have seen improvement in recent months, the Fed will wait to ensure the improvements are sustained before adjusting purchases accordingly.

The FsayaC held its pledge to keep interest rates at near-zero levels as long as unemployment remains above 6.5% and inflation remains less than 0.5% above the committee’s long-run goal of 2%. The inflation portion of this is not a concern for the Fed as “Inflation has been running somewhat below the Committee’s longer-run objective.” The press release also remarked that longer-term inflation expectations continue to be well anchored.

There was one dissenting vote, from Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

FsayaC Fed Funds Rate Projections


Read the FsayaCs entire statement below.

The ISM’s non-manufacturing index fell in March to 56.0 from 57.3 reported in February. While the index remained above contractionary levels, this is the first time this year the index has slowed and is at its lowest level since December. The more than expected decline is not too worrisome as the details remain mixed.


Both employment and inventory indices rose in March. Employment rose to 56.7 in March from 55.7. While inventory rose to 54.0 from 53.5 in February.

The business activity and new orders indices both fell. The business activity index fell to 58.9 from 62.6 in February. New orders fell to 58.8, from a high of 61.2 in February.

Supplier deliveries stayed constant at 49.5 in March, after the index fell in February to the first contraction level since September.

The trade details were negative in February as well, with the export index falling 2 points to 52.5. Much of this is likely due to decreased demand from Europe.

Read the report.

The service sector growth cooled in March, falling to the lowest level since August. The ISM non-manufacturing index fell to 54.4 in March from 56.0 the previous month. Despite the decline, services continue to outperform the manufacturing sector, which declined to 51.3 in March. Any reading over 50 indicated industry expansion.



The details of March’s report declined across the board except for supplier deliveries and backlogs. The employment index dropped 3.9 points to 53.3. Overall business activity edged lower to 56.5 index points, losing 0.4 points from the previous month.

Despite the overall decline in March, the indexes remained above the neutral threshold of 50, signaling an expansion, albeit at a slower rate then the previous month.

A copy of the press release can be found here.

ADP’s National Employment Report indicated that the private sector increased employment by 158,000 jobs in March. March’s increase is weaker then February’s gain, which was revised up by 39k jobs to 237k. Improvements in March continued to be driven primarily by the service sector. Februarys ADP report of 237k jobs matched closely to the 236k jobs reported by the BLS.



Job gains continue to be centered in the service sector, which added 151,000 jobs in March, down from 164,000 in February. Goods producing employment added 7,000 new jobs in March, a drop from the 34,000 jobs added in February. Manufacturing contributed 6,000 jobs, a decline from the 9,000 new jobs in February.

Read the ADP release.

The Federal Open Market Committee (FOMC) made no changes to policy at its March meeting, leaving interest rates at low level and announcing no new actions. “The committee expects economic growth to remain moderate over coming quarters and then to pick up gradually.” The unemployment rate has declined in recent months but remains elevated.

The target federal funds rate remains at 0 to ¼ percent. The committee reaffirmed its view that policy rates would remain “exceptionally low” through late-2014.

Inflation “has picked up somewhat,” due mostly to higher prices of crude oil and gasoline. Energy prices, however, are expected to influence prices “only temporarily,” and will subside later this year. Longer-term inflationary expectations remain stable.

Policymakers acknowledged some improvement in housing, but also noted that the market remains “depressed.” They also warned that “strains in the global financial system continue to pose significant downside risk to the economic outlook.”

The following is the Fed Funds forecast, with each dot representing the forecast of an individual member.


Chairman Bernankes press conference

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Read the release.