Despite weakness of the recovery, Fed intends to stay the course

Updated
Federal Reserve Chairman Ben Bernanke, July 18, 2012.
Federal Reserve Chairman Ben Bernanke, July 18, 2012.
Jason Reed / Reuters

The Federal Reserve’s Board of Governors released a statement on Wednesday saying that, although they saw signs that the economic recovery was slowing, they were not yet ready to do anything about it.

The Federal Reserve operates on the basis of a dual mandate: it manages the country’s money supply in a way that is supposed to maximize employment while keeping prices as stable as possible. Printing more money—also called loosening the money supply—can increase inflation, but it also has a stimulative effect on the economy, making it easier to borrow money, buy goods, expand businesses and hire more people.

While the Board acknowledged that “the unemployment rate remains elevated,” it said, “the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate.” Slowly, but not slow enough for them to try and speed the process up. This despite low inflation, which the Board said it expected to see continue.

Slate blogger Matthew Yglesias called today’s announcement an “epic fail,” writing: “The Federal Reserve announced today that neither weak employment growth nor falling inflation will inspire it to loosen up monetary policy. Instead they’re just going to adopt a random anchor and stick with the status quo unless disaster strikes.”

Ben Bernanke

Despite weakness of the recovery, Fed intends to stay the course

Updated