The Federal Reserve’s latest two-day meeting of its policymaking committee wrapped up this afternoon with few surprises. Its statement on policy generally displayed a belief that the economy is stronger; notably, the Federal Open Market Committee statement did not change at all on the question of inflation, even though the latest CPI figures showed an uptick.
More telling was the summary of economic projections the Fed provided to the markets at the same time. GDP growth for 2014 was revised sharply downward, while unemployment forecasts dropped slightly. I suspect that this reflects the increasing view within the Fed that unemployment rates are being driven down by low labor force participation than it does some brightening of job prospects. The Wall Street Journal interpreted the optimism as the Fed’s way of saying the economy is doing fine … and you’ll all see it in 2015. The market reacted with a nice 98 point gain on the Dow, almost all of which came after the announcement.More