Ahead of the April statement stocks were marginally higher supported by lower bond yields.
Despite a brief dip into the red, stocks have regained their poise and remain higher on the day. The vote to support a further reduction in the volume of purchases in straight line fashion – from $55bn to $45bn per month – was unanimous. Likewise the little changed wording of the statement was less divisive this time around. The committee noted the pick-up in growth, “having slowed sharply during the winter in part because of adverse weather conditions”. The focus remains firmly on the outlook for labor and inflation, both of which remain below par as the Fed continues to withdraw its level of stimulus.
In last month’s policy statement Minneapolis chief Kocherlakota dissented from the group. While supporting the part of the statement in which the committee tried to provide clarity on the path of monetary policy when the take-off point is finally reached for short-term interest rates (paragraph 6), he voted against that part of the statement (paragraph 5) in which the FOMC attempted to describe its pre-existing policy beyond the life of the asset purchase program. Mr. Kocherlakota felt at the time that its inclusion weakened policy credibility in wanting to force inflation towards its 2% target, thus hindering current economic activity.
Kocherlakota voted in favor of the latest policy statement and got over his angst regarding whether or not it served to hinder economic activity.