False alarm guys. The Fed is still boring.
When the Federal Reserve yesterday said they were going to make a major announcement, everyone assumed that with the US economy improving at a steady pace, the Fed would finally announce that they were raising interest rates. This caused an unprecedented occurrence. People were actually excited to see what the Fed had to say!
But this is the Fed. The Fed doesn’t do interesting. So like every Fed announcement, it wasn’t nearly as exciting as everyone hoped (ie interest rates would be unchanged). Yet that doesn’t mean important information wasn’t shared. Here’s a quick rundown in what the Fed had to say in yesterday’s announcement.
False Alarm, Interest Rates are Still Going to be Low
After all the speculation, the Fed did the most “Fed” thing it could have done, it didn’t change interest rates. While many deficit hawks disagree with Fed Chair Janet Yellen on the current state of borrowing, she insists that for the US economy to continue to prosper, interest rates would have to be low for a “considerable time.” How long is a “considerable time” exactly? Your guess is as good as ours.
You Know that US Economy, It Ain’t So Bad
Some of the best news that came from yesterday’s announcement was that the US economy was recovering quite well. Granted, it wasn’t as well as everyone had hoped, but it has been a stable recovery for the most part. One of the most significant indicators in all of this has been the decrease support from the nation’s central bank. The Fed stated yesterday that they would slowly reduce buying treasuries and mortgage-backed securities to $15 billion next month. That’s a drop from $85 billion last year! This is VERY good news, in that the Fed not needing to pump as much money into the economy is good for us all in the long run.
There’s Good News and Bad News Regarding the Economy
The Good News: As the economic recovery looks to be more sustainable, the Fed predicted that unemployment would drop to under 6% in the coming months!
The Bad News: Fed officials have also revised their estimates on economic growth by cutting its GDP growth estimates from 3.2% to 3.0%.
Guys, The Fed is Boring. And I Wouldn’t Want It Any Other Way
If we are to be completely honest with ourselves, there is very little different between the Fed’s last statement in June and yesterday’s announcement. But you know what, that’s the Fed. Nothing really changes with them. And that’s a good thing.
While it’s fun on a “what if” level to think of ways that the Fed could be more interesting in new and innovative approaches towards the economy, we have to ask ourselves, do we really want that? Like that fun loving, crazy uncle that gave you your first beer or rides a Harley without a helmet, you want him to be interesting and fun. But your parents, the people that you would call when you’re in some serious shit, you want them to be the rock of stability. You want them to be as boring as possible.
Because in life boring means stability.
So considering the country just went through one of the biggest financial collapses that it’s seen in decades and we are finally getting to a place of steady recovery, I’ll take boring any day.
(Photo Credit: Associated Press, Google Images)