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FED / Targeting unemployment and inflation

The Federal Reserve announced Wednesday that it will take unprecedented steps to bolster the economy, saying it will continue to stimulate growth until the unemployment rate falls to 6.5 percent or the inflation rate reaches 2.5 percent. The Fed said it did not expect unemployment to reach that benchmark until 2015.

It was a historic move that for the first time explicitly spells out the Fed’s goals for the nation’s economy and how it will respond to changing conditions.

The Fed says it will also begin buying $45 billion in Treasury bonds per month, on top of $40 billion per month it is already buying in mortgage bonds. The measures come as the nation braces for a possible recession if Congress and the White House do not reach a deal to avert a series of tax increases and major spending cuts set to go into effect at the end of the year.

The statement, coming after a two-day meeting of the Fed’s policy committee, amounts to a new commitment to trying to reduce unemployment. But it also shows that Fed officials remain concerned about the long-term prospects for the U.S. economy. The actions are likely to stimulate economic activity — because they suggest that the central bank will be boosting growth for at least two years — and markets jumped on the announcement. But stocks began losing gains by midafternoon, as Fed Chairman Ben S. Bernanke began his usual news conference after the Fed released its statement and economic projections. The Dow Jones industrial average was nearly flat by the end of the question-and-answer session at 3:30 p.m., and the Standard & Poor’s 500-stock index was up only 0.3 percent, dropping from a 0.7 percent high in the early afternoon.

Choosen excerpts by Job Market Monitor from

Washington Post

via Fed ties stimulus to jobs, inflation in unprecedented steps to bolster economy – The Washington Post.

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POSTED BY  ⋅ NOVEMBER 27, 2012 ⋅ LEAVE A COMMENT

Dallas Fed President Richard Fisher, a top Federal Reserve official, said on Tuesday that his main concern now was unemployment, not inflation. He said another option the Fed might consider to signal its aims to markets was a target for unemployment, although this would be difficult because monetary policy alone was not responsible for creating jobs. … Continue reading »

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Fiscal policy, at both the federal and state and local levels: headwinds for unemployment reduction says Bernanke

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Discussion

Trackbacks/Pingbacks

  1. Pingback: How to get to the 6.5% unemployment rate target: roughly 270,000 jobs each month « Job Market Monitor - December 14, 2012

  2. Pingback: The New Fed Unemployment Target: The story behind « Job Market Monitor - December 27, 2012

  3. Pingback: Fed / Aggressive easing needed says Yellen in an address to AFL-CIO « Job Market Monitor - February 12, 2013

  4. Pingback: US / Fed shifts focus from inflation to jobs | Job Market Monitor - March 12, 2013

  5. Pingback: US / ‘Price stability’ remains the policy advice even in the face of serious labor market inefficiencies says St. Louis Fed’s Bullard | Job Market Monitor - April 19, 2013

  6. Pingback: Low Interest Rates Didn’t Induce Job Growth finds Research by St-Louis FED | Job Market Monitor - April 24, 2013

  7. Pingback: US / Possible Fed Successor, Janet Yellen, Has Admirers and Foes | Job Market Monitor - April 25, 2013

  8. Pingback: When Will The Unemployment Rate end the Fed’s Easing Measures ? | Job Market Monitor - May 7, 2013

  9. Pingback: The Federal Reserve Act calls for ‘maximum employment’, not ‘minimum unemployment’ | Job Market Monitor - May 7, 2013

  10. Pingback: US / When will the unemployment rate fall to 6.5% (the Fed’s threshold) | Job Market Monitor - July 1, 2013

  11. Pingback: Monetary Policy / Why it matters whether the fed targets inflation or unemployment | Job Market Monitor - December 2, 2013

  12. Pingback: The Fed and the Unemployment Rate / Fisher says he’s opposed to cutting the 6,5% threshold | Job Market Monitor - December 10, 2013

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