Leaders at the Federal Reserve voted Wednesday to move forward with the central bank's plans to gradually cut monthly bond purchases, a sign of growing confidence that the economy is trending in a more favorable direction.
In a statement released following its July meeting, the Federal Open Market Committee (FOMC) announced it has voted to bring its purchases of agency mortgage-backed securities and longer-term Treasury securities to a combined pace of $25 billion per month.
Members voted almost unanimously for the committee's monetary policy action and its public statement, with Philadelphia Fed President Charles I. Plosser casting the only dissenting vote. According to the FOMC statement, Plosser objected to the Fed's commitment to stick to its target range for the federal funds rate for "a considerable time after the asset purchase program ends," arguing that the language "is time dependent and does not reflect the considerable economic progress that has been made toward the Committee's goals."
The rest of the FOMC statement was largely unchanged, though a few differences from previous releases indicate the committee members are feeling more optimistic. In describing the falling unemployment rate, the committee acknowledged that "there remains significant underutilization of labor resources," a change from the usual note that unemployment "remains elevated."
At the same time, the committee said the likelihood of inflation running below its 2 percent goal "has diminished somewhat," moving away from its more cautious usual wording.
The FOMC announcement came on the same day as the latest report on gross domestic product, which showed economic growth rebounded to an annual rate of 4.0 percent in the second quarter. Coming up on Friday is the employment situation report for July, which analysts expect will show payroll growth of more than 200,000 for the sixth straight month.
With three more committee meetings scheduled this year and economic indicators looking better, most analysts anticipate the Fed's asset purchasing program will come to a close before winter, about two years after it was first announced.