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Market Commentary by Scott J. Brown, Ph.D., Chief Economist<\/span><\/em><\/strong><\/p>\n The FOMC indicated that recent inflation readings have been low due partly to “transitory influences.” The downside risks to the outlook for growth and the labor market had “diminished” since the fall. The FOMC repeated that it could “increase or reduce” the pace of asset purchases depending on how the outlook for the labor market or inflation changes.Fed officials slightly raised their projections of GDP growth for 2014 and revised their expectations for unemployment slightly lower.<\/p>\n In his press briefing, Fed Chairman Bernanke said that if the economy evolves as anticipated (growth picks up, unemployment falls, and inflation gradual moves back to the 2% target), then the FOMC would likely step down the pace of asset purchases later this year<\/strong>, and if the economy continues to improve, the asset program would likely come to an end in mid-2014 (as the unemployment rate falls to 7.0%).<\/p>\n However, Bernanke stressed (in his opening statement and a number of times in the Q&A) that policy will remain data-dependent.<\/p>\n Bernanke did not signal any change in monetary policy. Rather, his point was to outline clearly how the evolution of the economic outlook will drive policy decisions. Tapering is not tightening and an increase in short-term interest rates is still a long way off.<\/p>\n Bernanke used the analogy that, in reducing the rate of asset purchases, the Fed would be slightly taking the foot off the gas pedal. It won\u2019t be hitting the brakes anytime soon. Nevertheless, stocks fell sharply and bond yields surged. It\u2019s not clear whether the markets simply misinterpreted the Fed Chairman\u2019s statements or were badly mispriced to begin with.<\/p>\n Next week, there are a number of potentially market-moving data releases. It may take some time for the markets to properly digest what Bernanke said.<\/p>\n![\"Scott](\"http:\/\/www.clarksvilleonline.com\/wp-content\/uploads\/2010\/05\/scottjbrown-159x200.jpg\" "\\"Scott")
The Federal Open Market Committee left short-term interest rates unchanged, did not alter its forward guidance on the overnight lending rate, and said it would maintain its asset purchase program at $85 billion per month. The policy statement was a near photocopy of the previous one.<\/p>\nIndices<\/h3>\n
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<\/a>Material prepared by Raymond James for use by its financial advisors.<\/p>\n