In a written statement issued June 19th,
the Federal Reserve gave no indication of plans to slow its purchase of bonds
and other assets in effort to stimulate the U.S. economy. In the statement, the
Fed said it would continue its monthly purchase
of $40 billion worth of mortgage-backed securities along with its monthly
purchase of $45 billion in longer-term Treasury securities.Fed chairman Ben Bernanke added in a
later press conference that the Fed may slow the pace of its monthly purchases
later this year if its projections for falling unemployment hold true. Once
that tapering begins, it will continue until the unemployment rate comes down
to 7%, at which point the Fed's stimulus purchases will end, Bernanke said.
Bernanke expects that point to come
some time next year, but made clear that the Fed could change course if the
economy does not improve as it is projecting. Since 2008, the Fed has injected
$2.5 trillion into the U.S. economy in an attempt to spur economic growth and
keep interest rates low.
The stimulus policy has many
supporters, including most economists and President Obama. They point to growth
in the U.S. economy over the last few years, which has generally outpaced that
of Europe or Japan. But critics contend that adding so much debt to the Fed’s
balance sheet will ultimately lead to unfettered inflation.
The Fed's updated economic
projections, also released on June 19th, showed that unemployment
may drop to 6.5% for the first in 2014. This milestone number will be welcome
news as the unemployment rate currently stands at 7.6%, down from 10% during
the worst of the recession.
The Fed also lowered its estimates of
GDP growth in 2013, from the 2.8% it was forecasting in March to 2.6% now. It also
lowered its unemployment rate projections slightly for this year, and also
lowered its projections for inflation in 2013.