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FED Drops Unemployment Target Even Lower

Posted on April 10, 2014

Federal Reserve officials had a secret video conference call in early March and reached a general consensus that the 6.5% unemployment rate threshold for the first rate hike was outdated, the central bank said Wednesday.

A summary of the video conference was included in the minutes of the Fed’s March 18-19 meeting released by the Fed.

The central bankers were clearly worried that changing the forward guidance would impact markets.

They noted that, going into the video conference, the central bank and the markets were on the same page about the outlook for short-term interest rates.

The minutes of the March 18-19 meeting also reveal that there was concern that the markets would read too much into the “dot plot,” which showed an upward shift in the Fed’s expectations for short-term rates. The so-called dot plot reflects where each Fed official expects interest rates.

The “dot plot” showed the Fed’s median forecast of the fed funds rate rose by a quarter of one percentage point to 1% for 2015 and by a half a percentage point to 2.25% by the end of 2016, according to Barclays.

Federal Reserve Chairwoman Janet Yellen specifically said in a press conference afterwards not to pay attention to it.

She stressed in their statement that the guidance shift did not indicate any change in the Fed’s policy intentions.

Officials also spelled out in much greater detail the headwinds that would keep short-term rates low even after the first rate hike. These headwinds included higher precautionary savings by U.S. consumers, higher levels of savings around the globe, demographics and credit restraints.

Stocks jumped after the minutes were released, possibly on the dovish emphasis over the dot plot. The Dow Jones Industrial Average was up 158 points to 16,414.

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3 thoughts on “FED Drops Unemployment Target Even Lower

  1. Jeanne Stotler says:

    Why not put out a truthful number, count those who are not working but want to, and can no longer collect unemployment, then SHOW those who can only get part-time jobs, this is the reason food stamps, Medicaid, and welfare are so high

  2. Real unemployment is around 37%. But regardless of how bad the economy gets, the official stats always hover just under 10%. Amazing!

    Also not counted in the government figures are jobless who have run out of unemployment benefits. They are simply dropped from the count altogether, even thought they're still without a job. They become non-persons.

  3. WhiteFalcon says:

    Everything that this Government or the Fed tells us is an outright lie. There is not an honest bone between them.