FOMC Statements

[HenryTo]

FYI:

Press Release
Release Date: June 25, 2008

For immediate release

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.

The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.

[HenryTo]

The Federal Reserve or Bernanke "put" may still exist, but only at much lower global asset prices. Also, its efficacy on both the US economy and stocks is being doubted by investors.

http://finance.yahoo.com/news/fed-several-members-could-support-180157141.html

[HenryTo]

Fed's Operation Twist to expire at the end of June; but its effects are already fading.

http://bankcreditanalyst.com/public/story.asp?pre=PRE-20120417.GIF

[rffrydr]

The "Bearded Dove" missed big on housing...and now clings to it. Went out on Diane Sawyer last night. No amount of "transparency" is ever going to lift the FED's image in a society that can't even manage its multiplication tables.

BAC just announced its segway into landlordship...it only took four years! So much for "efficient" markets. So much for "government". China, we luv you!
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Ed Yardeni asserts Bernanke will remain dovish at least for the foreseeable future.

http://blog.yardeni.com/2012/03/bernanke-lectures.html

[rffrydr]

We've gone from "modest" to "moderate"--yeah, baby!
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Preview of tomorrow's Fed meeting results.
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No new action is expected as Fed weighs job gains

By MARTIN CRUTSINGER, AP Economics Writer – 6 minutes ago

WASHINGTON (AP) — Since the Federal Reserve's policymakers last met in January, the job market has shown more muscle. Employers have hired more than a half million people. The unemployment rate is down.
The core issue the policymakers face when they meet Tuesday is whether that burst of strength will last long enough for them to soon scale back their support for the economy.

No major announcements are expected after the Fed's one-day meeting. Private economists think the officials will note the job gains. But they expect them to repeat their plan to keep short-term interest rates at a record low until at least late 2014.

Those low rates are intended to encourage consumers and businesses to borrow and spend more. Lower yields also lead some investors to shift money out of bonds and into stocks.

Despite the brightening prospects for job seekers, unemployment remains historically high at 8.3 percent — something Federal Reserve Chairman Ben Bernanke mentioned in testimony to Congress last month, when he said, "The job market remains far from normal."

Bernanke also said consumer spending and confidence remain less than healthy, inflation-adjusted pay gains are low and credit is still tight for many. As long as they are, Bernanke suggested, unemployment might not fall much further.

Bernanke's comments and remarks from other Fed officials suggest that the Fed plans to maintain its efforts to keep rates low to fuel growth.
"The Fed has to be encouraged about the economic data they have been seeing," said David Wyss, former chief economist at Standard & Poor's in New York. "But given that unemployment is still 8.3 percent, it is hard to see them taking their foot off the accelerator."

Most economists don't think the Fed will retreat anytime this year from its late-2014 target for any rate increase. Some note that threats to the economy remain from Europe's debt crisis and the run-up in gasoline prices.

Eventually, the Fed will feel compelled to raise rates to curb inflation as the economy heats up. But some analysts think the Fed is reluctant to signal an eventual shift toward higher rates before it's close to a change.

Signaling a change too soon might cause investors to push interest rates up before the Fed is sure the economic recovery will last.

"It would be extremely damaging if they changed their message right now," said Brian Bethune, an economics professor at Amherst College. "It would reverberate across financial markets."

Some analysts even think the Fed is prepared to go further to try to strengthen the economy.

Vincent Reinhart, a former top Fed official involved in interest-rate policy, foresees a three-in-four chance that the Fed will announce some new action by June. That's when the Fed's latest program to drive down long-term rates will expire.

Fed policymakers "have consistently pointed to reasons the performance of the economy will be subpar and at significant risk in the near term," Reinhart, now chief U.S. economist for Morgan Stanley, wrote in a research note last week.

Reinhart suggested that the most likely move would be a third round of bond purchases. Two previous rounds have helped expand the Fed's balance sheet to $2.94 trillion — triple what it was before the financial crisis erupted in 2008. The balance sheet reflects assets the Fed has taken on, such as bonds and mortgage-backed investments.

The Fed's purchases of securities have triggered criticism from some, including Republican presidential candidates. They argue that the central bank is fueling future inflation by steadily pumping more cash through the banking system.

To make the bond purchases, the Fed essentially creates money. It then uses it to buy bonds to try to drive down their yields. The idea is for banks to lend at lower rates.

But critics say the bond purchases have weakened the dollar's value. That makes foreign goods more expensive.

And they say the purchases have forced up the prices of commodities such as oil and heightened the risks of asset bubbles. They note that the housing bubble was fueled by a previous period of prolonged low rates engineered by the Fed.

To address such concerns, Reinhart said the Fed might consider making "sterilized" bond purchases. In doing so, it would buy more long-term bonds — but borrow the same amount it's spending. The Fed would borrow through short-term loans called repurchase agreements.

This effort would be similar to the Fed's current "Operation Twist" program. Under this program, the Fed is buying $400 billion in long-term bonds while selling a similar amount in short-term holdings. That way, its balance sheet doesn't grow.

The Fed has been forced to use unconventional means to support the economy because its principal tool, the federal funds rate, can't go any lower. The Fed's target for that rate has stayed at a record low between zero and 0.25 percent since December 2008.

Mark Zandi, chief economist at Moody's Analytics, said he thinks the first rate increase will occur in early, rather than late, 2014. But he says the Fed won't likely signal any change in plans for at least another year.

"We are still at least two years away from an actual Fed tightening of interest rates," Zandi said. "A lot can happen between now and then, and I think the Fed is doing exactly the right thing by keeping all of its options on the table."

[rffrydr]

"More comfortable" indeed....two doves rotating out two hawks.

The FED is NOT a viable institution at 9% Unemployment--and they know it.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Bridgewater's comments on yesterday's Fed meeting.

[HenryTo]

Nothing new in FOMC statement; although it does point out "significant downside risks" which alludes to the European debt crisis.

Release Date: December 13, 2011

For immediate release

Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.

[rffrydr]

Zero means nothing. FED struggles with new ways to express itself:

http://online.wsj.com/article/SB10001424052970204083204577078601620105164.html?mod=WSJ_hp_LEFTWhatsNewsCollection

The problem here is that Business will just use this as a crutch as any zero rate regime will in and of itself be a world of "uncertainty." The 2013 pin on zero did nothing to ease that same uncertainty last year...and that's about as clear as you can get.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Dr. Yardeni on Operation Twist:

http://blog.yardeni.com/2011/09/twist.html

[HenryTo]

Operation Twist now in play; also, agency debt and MBS principal payments will be reinvested.

Release Date: September 21, 2011

For immediate release

Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

[rffrydr]

Yup.....Jamie says he's got more ways to skin a cat. We're gonna see if that's true.

http://www.cnbc.com/id/44090455
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Today is the Tomorrow you worried about Yesterday!

[nodoodahs]

Pension funding level/interest rate relationship has been hit on another thread, too, I think.

You mentioned Fannie/Freddie and that made me think about the convexity issue with MBS and ABS, slammed rates means more refinancing, which acts as a callable feature on the bond, lowering value of the security.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[rffrydr]

I think you really nailed something here, Bill. Low rates are good but slammed rates are killers. In the context of the "bond bubble" institutional durations were shortened if not shorted--for them, it was prudent. For the Hedge Funds, it was the obvious bet. Even for the world's biggest bond fund.

This kills pensions and kills States (who technically shoulc've been downgraded with US) who are responsible for them. It also kills big corps responsible for most of our employment. Banks have been a giant tar-baby (not even QEII could dislodge the money) as far as the money goes; and court-house whipping boy for everything else.

Everyone with current, seasoned, Freddie/Fannie mortgage should get rolled to 4% within the quarter. Programs for equity stakes in return for principal writedowns (hedge funds were already doing this in '08 a la "Rex Agreement") on (investor)held loans...and worked on for bigger collateralized packages. Power to the people
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Today is the Tomorrow you worried about Yesterday!