The Corner

Fed Keeps Shrinking QE, Claims ‘Further Improvement’ in Jobs Market

As was expected, the Federal Reserve announced today that it will again slow the pace of its bond-buying program, from $75 billion per month to $65 billion a month. In December, it slowed the pace of the program, which essentially creates money to purchase federal-government bonds and government-created mortgage-backed securities, from its peak pace, $85 billion a month.

The Fed offered the following justification for its move: “Labor market indicators were mixed but on balance showed further improvement.” This is a little odd, to be blunt. While the unemployment rate dropped significantly in December, job growth was quite weak (though it may be revised). The one recent optimistic sign for the labor market has been an uptick in people quitting their jobs and companies creating job openings, and that can be pretty meaningful — but vast swaths of Americans remain out of work and many others are leaving the labor force altogether. The employment picture is not good. That said, perhaps the Fed knows this, but is growing increasingly skeptical that it can do anything about it.

The committee’s statement on the move does offer one cheer for Washington, D.C.:  “Fiscal policy is restraining economic growth, although the extent of restraint is diminishing,” they write, compared to their statement in December, when they said it “may be diminishing.” The fiscal policy they’re complaining about is the tax increases and spending cuts enacted in 2013, which they apparently think are still causing some problems, but now clearly diminishing ones.”

This was the last statement released by the Fed’s policy-making committee with Bernanke as chairman. Janet Yellen’s first committee meeting will be in mid March.

Patrick Brennan was a senior communications official at the Department of Health and Human Services during the Trump administration and is former opinion editor of National Review Online.


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