（Kitco News) - The Federal Open Market Committe remains optimistic that the U.S. economic recovery is gaining momentum as it shed another $10 billion from its monthly bond-purchase program Wednesday.
The Fed's quantitative easing program is now at $25 billion a month. Starting in August, the Fed will buy $10 billion in mortgage-backed securities and $15 billion in long-term Treasury securities, according to a statement released after a two-day meeting of the Federal Open Market Committee.
Jim Wyckoff, senior analyst at Kitco.com said the in-line statement had little impact on gold prices. As of 2:40 p.m. electronic trading of December Comex gold futures were down $2.80 to $1,297.60 ounce.
The Fed’s monetary policy statement was released the same day that U.S. advance second-quarter gross domestic product grew by 4.0%, helping to confirm the Fed’s view that the slowdown at the start of the year was the result of bad weather.
Along with cutting its quantitative-easing purchases, the committee also voted to maintain interest rates within its current target between zero and 0.25%.
In the statement, the Fed said that they see continued improvement in the labor market, but at the same time they said that “there remains an underutilization of labor resources.”
The committee also continues to be slightly pessimistic towards the housing sector, an area they have previously noted as concern within the recovery. “Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow.”
The committee also appears to be keeping a close eye on inflation, saying “inflation has moved somewhat closer to the committee's longer-run objective.”
Monetary policy hawks are starting to make their appearance known within the committee as Charles Plosser, president of the Federal Reserve of Philadelphia, voted against the committee’s monetary policy stance.
According to the statement, Plosser “objected to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for ‘a considerable time after the asset purchase program ends,’ because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee's goals.”
Avery Shenfeld, senior economist from CIBC said as expected there were no major changes to the Fed’s stance. Shenfeld added that he had expected Dallas Fed President Richard Fisher to vote along side Plosser.
“All told, the Fed opted to cling to its patient message in terms of when rates might begin to rise, and didn’t tip its hand significantly on that issue in this statement,” he said.
July 15, Fed Chair Janet Yellen testified before the U.S. Committee on Banking, Housing and Urban Affairs and said that the committee would have to see a significant change in the U.S. economy and would have to lose confidence that the labor market is strengthening for the central bank to halt its current exit strategy.
By Neils Christensen of Kitco News; nchristensen@kitco.com
