Key Statements from the FOMC
* The information reviewed for the March 18-19 meeting indicated that economic growth slowed early this year, likely only in part because of the temporary effects of the unusually cold and snowy winter weather. Total payroll employment expanded further, while the unemployment rate held steady, on balance, and was still elevated. Consumer price inflation continued to run below the Committee's longer-run objective, but measures of longer-run inflation expectations remained stable. * Total nonfarm payroll employment rose in January and February at a slower pace than in the fourth quarter of last year. * Manufacturing production was roughly flat, on balance, in January and February, in part because of the effects of the severe winter weather, which held down both motor vehicle output and production outside the motor vehicle sector. * Real personal consumption expenditures (PCE) increased a little, on net, in December and January. * The pace of activity in the housing sector appeared to soften. * Measures of labor compensation indicated that increases in nominal wages remained subdued. * Financial market conditions in the United States over the intermeeting period appeared to have been influenced by an easing of concerns about developments in the EMEs but relatively little affected by the generally weaker-than-expected economic data, which market participants appeared to attribute in large part to the temporary effects of unusually severe winter weather. On balance, U.S. financial conditions remained supportive of growth in economic activity and employment: The expected path of the federal funds rate was little changed, longer-term yields on Treasury securities edged down, equity prices rose, speculative-grade corporate bond spreads narrowed, and the foreign exchange value of the dollar depreciated slightly. * Broad stock price indexes rose over the intermeeting period, apparently boosted by a solid finish to the corporate earnings season. Equity prices were also supported by a broad increase in investors' willingness to take riskier positions, in part likely reflecting an easing of concerns about EMEs early in the period... House prices registered a further notable rise in January. * The staff's assessment was that the unusually severe winter weather could account for some, but not all, of the recent unanticipated weakness in economic activity, and the staff lowered its projection for near-term output growth. Largely because of the combination of recent downward surprises in the unemployment rate and weaker-than-expected real GDP growth, the staff lowered slightly the assumed pace of potential output growth in recent years and over the projection period. As a result, the staff's medium-term forecast for real GDP growth also was revised down slightly. Nevertheless, the staff continued to project that real GDP would expand at a faster pace over the next few years than it did last year, and that real GDP growth would exceed the growth rate of potential output. * A few participants, however, highlighted factors other than weather that had likely contributed to the slowdown during the first quarter, including slower growth in net exports following its unusually large positive contribution to growth in the fourth quarter of 2013. Moreover, it was noted that some of the pickup in economic growth that had appeared to have been indicated by the data available at the January meeting had been reversed by subsequent data revisions. For many participants, the outlook for economic activity over coming quarters had changed little, on balance, since the time of the December meeting. * While there was general agreement that slack remains in the labor market, participants expressed a range of views regarding the amount of slack and how well the unemployment rate performs as a summary indicator of labor market conditions. Several participants pointed to a number of factors--including the low labor force participation rate and the still-high rates of longer-duration unemployment and of workers employed part time for economic reasons--as suggesting that there might be considerably more labor market slack than indicated by the unemployment rate alone. * However, in light of their concerns about the possible persistence of low inflation, members agreed that inflation developments should be monitored carefully for evidence that inflation was moving back toward the Committee's longer-run objective. * Members again judged that, if the economy continued to develop as anticipated, the Committee would likely reduce the pace of asset purchases in further measured steps at future meetings.