By Dees Stribling, Contributing Editor
The Federal Reserve released the minutes from the June 18-19 meeting of the Federal Open Market Committee on Wednesday, and while (as usual), they weren’t precisely a model of clarity, the minutes did seem to reinforce the idea that the central bank is indeed planning to “taper” its QE3 stimulus program. At least half of the committee seemed to be on board with that idea.
There was a caveat, however. According to the minutes, “While recognizing the improvement in a number of indicators of economic activity and labor market conditions since the fall, many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases.” That is, the employment outlook is the key: another couple of months like June (up 190,000 jobs), and the tapering will probably begin.
The committee also warned that tapering, if not done carefully, might upset the economy by making investors suspect that interest rates were going up, too. “Other [members of the committee] were concerned that stating an intention to slow the pace of asset purchases, even if the intention were conditional on the economy developing about in line with the Committee’s expectations, might be misinterpreted as signaling an end to the addition of policy accommodation or even be seen as the initial step toward exit from the Committee’s highly accommodative policy stance,” the notes said. “It was suggested that any statement about asset purchases make clear that decisions concerning the pace of purchases are distinct from decisions concerning the federal funds rate.”
After the release of the minutes, Fed Chairman Ben Bernanke reiterated this point during a press conference held by the National Bureau of Economic Research. “You can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” he said. The chairman added that the Fed won’t raise short-term rates until “sometime after” the national unemployment rate comes in at 6.5 percent. That’s more than a full percentage point lower than the current rate of 7.6 percent.
Foreclosures down in first half
RealtyTrac reported on Wednesday that the number of U.S. residential properties with foreclosure filings fell 23 percent in the first half of 2013, compared with the same period last year. At the current rate, RealtyTrac predicts, there will be 800,000 foreclosures for all of 2013, down from 1.1 million in 2012.
One in 164 housing units had at least one foreclosure filing during the six-month period, by which the company means a default notice, a scheduled auction, or a bank repossession. Florida is suffering the country’s highest foreclosure rate among the states during the first half of 2013, with one in every 58 housing units experiencing a foreclosure filing during the six-month period. Nevada had the second-highest state foreclosure rate—one in every 71 homes for the period.
Wall Street jumped around on Wednesday after the FOMC minutes were released, and the chairman said what he had to say, but the markets didn’t actually move much in the end, except for tech stocks. The Dow Jones Industrial Average was down 8.68 points, or 0.06 percent, but the S&P 500 gained a minuscule 0.02 percent, and the Nasdaq was up 0.47 percent.