Introduction
In 2013, the global economy grew at its fastest pace in nearly three years, signaling steady yet unglamorous expansion of approximately 3% annualized. During the early parts of 2014 the economy has been stagnate. Although since the Federal Open Market Committee meeting in March 2014 economic indicators are indicating growth in economic activity. The growth was stunted in the early part of 2014 mainly due to adverse weather conditions during the winter months. This trend is reflected in the initial estimates of real GDP growth for the 1st quarter of 2014 which slightly increased by an annual rate of .1 percent compared to the 4th quarter of 2013. The growth rate shown in 2014 is compared to a 2.4 percent growth rate realized in 4th quarter of 2013. The deceleration in real GDP growth during the first quarter of 2014 is a direct result of negative contribution from exports, private inventory investments, and state and local government spending. This trend in GDP is a direct result of the federal fiscal policy established for 2014. Long term interest rates during the years after the financial crisis were intentionally maintained at very low levels. These low levels of long term interest rates enabled the economy to bounce back and experience moderate growth. During 2013, we saw interest rates begin to increase with further increases expected in the coming years. The current levels of the money supply in the United States as of March 2014 are at all-time highs. The M2 in the United States has gradually been increasing since January 2013. US stock market experienced a solid year in 2013, led by continued monetary support as a result of polices put in place by the Federal Reserve, in addition to gains in revenues and earnings for numerous US corporations. During the first quarter of 2014 the main indexes recorded meek gains with the only index recording a loss being the Dow Jones Industrial Average. Lastly, Treasury yields for most maturities fell during the first quarter due in part to risk aversion resulting from circumstances in Russia as well as worries about the economic strength of some emerging markets. Meanwhile treasury bonds saw significant price increases and yield declines. Weak U.S. economic data was the primary trigger for the lift in Treasury prices.
There have been several actions that we have taken to support our key objectives of maximum employment, stable prices, and moderate long-term interest rates. One action is shown by the Committees decision throughout 2013 to carry on purchasing additional agency mortgage-backed securities at a rate of $40 billion per month and long-term Treasury securities at a rate of 45 billion a month. Another action taken is the policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and rolling over maturing Treasury securities at auction. These two actions have enabled us to maintain downward pressure on long term interest rate and ensure financial conditions are more stable. During 2014 the decision was made to reduce the purchases of mortgage-backed securities to $30 billion per month from $35 billion per month, as well as reducing the purchase of long-term Treasury securities to $35 billion per month compared to $40 billion per month. Another action taken is the accommodative monetary policy we have put forth. This has been crucial to support the continued progress toward maximum employment and price stability. During 2014 we reaffirmed our view that a highly accommodative stance of monetary policy will remain suitable for a substantial time after the asset purchase program ends and the economic recovery strengthens. Particularly, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent. We currently anticipate that the low range for the federal funds rate will encourage more spending from consumers and businesses by making money less