For the first time in the 97-year history of the Federal Reserve, its chairman conducted a scheduled press conference. Usually when you have seen Greenspan or Bernanke behind a podium, something really, really bad has happened in the financial markets. Not so anymore--welcome to the new, transparent Fed!
Still, these guys are economists, so you need a special "Fed Decoder Ring" to understand what they say. Luckily, I had mine polished for the occasion and here's what you need to know from the Fed's decision on monetary policy and the press conference that followed:
- Fed Funds Rate continues to be 0-0.25 percent (same rate since December, 2008)
- The Fed will complete its $600 billion bond buying program ("QE2") at the end of June, as scheduled--QE3 highly unlikely
- The economic recovery is proceeding at a "moderate pace"
- Economic growth was revised down to 3.1-3.3 percent for this year
- Inflation has ticked up, but the Fed thinks it will be "transitory"
- Gas prices should drop, as the situation stabilizes in the Middle East
- The Fed can't do anything about rising gas prices, but knows that it stinks for us
- Jobs market is getting better, but only slowly
- Unemployment should drop to 8.4 - 8.7 percent by the end of the year
- The Fed can't do too much about long-term unemployment either, but it also knows that it stinks for us
- The deficit is the most important issue for the country, but Congress shouldn't be too aggressive in cutting spending because the recovery is fragile. If Congress hacks too much, the Fed will keep the spigots open longer and wider.
- At the end of the afternoon, here's what I think the central bankers really want us to know: We can't solve all of the economy's problems, but that doesn't mean we don't care.