Federal Reserve Cuts Monthly Bond Purchases Down To $45B Despite Anemic Growth

The Federal Reserve will reduce its monthly bond purchases to $45 billion despite anemic first-quarter growth, suggesting the risks are beginning to weigh on their minds.

In continuing its so-called tapering policy, the Federal Open Market Committee announcement Wednesday was the fourth time in as many meetings the committee cut $10 billion from its asset purchase program, also known as quantitative easing.

Despite a headline and misleading 6.7 percent unemployment rate, first-quarter growth of just .1 percent and inadequate job growth, the Fed’s decision-making committee claimed the economy and labor market were strong enough to handle another round of tapering.

“The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions,” said the committee’s policy statement.

The statement also scapegoats the economic harm from the unusually brutal winter weather, claiming that “growth in economic activity has picked up recently, after having slowed sharply during the winter because of adverse weather conditions.”

But the Fed’s policy-making committee is beginning to fear obvious risks from their policy, which have always been inflation and hurting the American saver. Prices for food and other goods have increased last quarter, while spending on necessity products is down. In another report released by the Commerce Department Wednesday spending on health care hurt economic growth, as American consumers were forced to adjust their spending habits, cutting into overall GDP growth.

Yet the FOMC also reaffirmed its aforementioned timeline for increasing the federal funds rate, stating “it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends.”

In its March meeting, the Fed’s policy-setting committee altered its conditions for an increase in the short-term federal funds interest rate, junking its 6.5 percent unemployment rate target for a vague, undisclosed economic environment including “labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.”

As for its asset purchases, beginning in May, the Fed will buy $20 billion of agency mortgage-backed securities and $25 billion of longer-term Treasury securities, which represent reductions of roughly $5 billion for each asset.

The decision was unanimous, with not a single voting members disagreeing with the committee’s policy action.