Build Your Own Fed Statement

By: Ted Rood
The FOMC Statement due out at 2pm will continue in the Fed's fine tradition of keeping most of the text unchanged and merely updating key sections that help evolve the policy over time.  Wouldn't it be more fun if we got to make our own updates?  With that in mind, it's time once again to play "Build Your Own Fed Statement".  It's easy to win, just choose your favorite answers from the bold options below:
 
Information received since the Federal Open Market Committee met in September generally suggests that economic activity has continued to (expand at a moderate pace; bewilder and confound CNBC pundits; survive protracted legislative shenanigans). Indicators of labor market conditions have shown some further improvement, but the unemployment rate remains elevated. Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months (as evidenced by loan officers' rapidly dwindling cash reserves; as higher mortgage rates "shockingly" impacted housing sales; leading many Realtors to pursue seasonal employment at local big box retailers)(Fiscal policy; Congressional gridlock and dysfunction; Rampant public consternation over Affordable HealthCare Act) is restraining economic growth. Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.
       
Consistent with its statutory mandate, the Committee seeks to foster (maximum employment and price stability; peace on earth, good will to men; economic Nobel Prizes for Committee members). The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace (at some point in the distant future or sooner; since equities continue to gain 20% annually; should Mike Shanahan receive his anticipated buyout) and the unemployment rate will gradually decline (with the exception of certain current NFC East head coaches; unless UPS conducts mass layoffs due to Amazon Drone Deliveries; as pizza sales soar for WA and CO "herb" enthusiasts) toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall (as Congress appears poised to actually pass a bipartisan budget plan; since even unqualified, schizophrenic sign language interpreters can gain employment;  due to burgeoning IT hiring following HealthCare.gov's launch debacle). The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.
   
Taking into account the extent of federal fiscal retrenchment over the past year, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more (evidence that progress will be sustained; Edward Snowden leaks on NSA's FOMC surveillance; imaginative Miley Cyrus videos) before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month (in light of FHFA's looming "risk based pricing adjustments; to build further anticipation for release of next Fed Minutes; solely because we can). The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing Treasury securities (at auction; into bitcoin futures; on Atlantic City keno investments). Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.
   
The Committee will closely monitor incoming information on (economic and financial developments; point spread changes for BCS Championship Game; freeze resistant Manhattan cockroaches) in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. In judging when to moderate the pace of asset purchases, the Committee will, at its coming meetings, assess whether incoming information continues to support the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective. (Asset purchases; Committee Christmas gift expenditures; The current chairman's retirement compensation packages) are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook as well as its assessment of the likely efficacy and costs of such purchases.
   
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of (monetary policy; generous holiday tips for domestic staff; aggressive Mega Millions lottery ticket purchases) 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. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of (maximum employment and inflation of 2 percent; complete New World Order global power; replacing legislative branch of federal government with Committee controlled cyborgs).