FOMC Statement released – here is the recap
The FOMC Statement has been released. Here is a recap
FED REAFFIRMS PROMISE TO KEEP RATES EXCEPTIONALLY LOW FOR AN EXTENDED PERIOD
FED REPEATS EXPECTATION THAT MORTGAGE BACKED SECURITIES, AGENCY DEBT PURCHASES TO BE EXECUTED BY END OF Q1
SWAP ARRANGEMENTS WITH CENTRAL BANK COUNTERPARTIES WILL CLOSE SWAP ARRANGEMENTS ON FEB 1
FED SAYS WINDING DOWN TERM AUCTION FACILITY, FINAL AUCTION TO BE ON MARCH 8
HOENIG ONLY DISSENT IN DECISION ON POLICY ACTION; BELIEVED CONDITIONS CHANGED, LOW RATE, EXTENDED PERIOD VOW NO LONGER NEEDED
ECONOMIC ACTIVITY TO STRENGTHEN, DETERIORATION IN LABOR MARKET ABATING
HOUSEHOLD SPENDING EXPANDING AT MODERATE RATE, CONSTRAINED BY WEAK LABOR MARKET, TIGHT CREDIT
INVESTMENT IN STRUCTURES STILL CONTRACTING, BUSINESSES RELUCTANT TO ADD TO PAYROLLS
BANK LENDING CONTINUES TO CONTRACT, BUT FINANCIAL CONDITIONS SUPPORTIVE OF GROWTH
PACE OF RECOVERY SEEN MODERATE FOR A TIME, FED ANTICIPATES GRADUAL RETURN TO HIGHER RESOURCE USE
FED SAYS WITH HIGH UNEMPLOYMENT, STABLE INFLATION EXPECTATIONS, INFLATION LIKELY SUBDUED FOR SOME TIME
The initial knee jerk reaction is HIGHER INTEREST RATES
The 3.375% coupon bearing 10yr Treasury note is -0-04 at 97-27 yielding 3.638%.
The FN 4.0 is now -0-02 at 97-28 and the FN 4.5 is -0-02 at 100-28.
Stocks have not budged. The S&P is still -0.50% at the all important 1086 support level. That pivot point is obvious in the chart below….
HERE IS THE TEXT:
Release Date: January 27, 2010
For immediate release
Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.
In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit wil be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.
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The Buzzz Blog | The Buzzz | January 27, 2010
I’m not sure if I totally agree. However, you do make a good point. Maybe I can create a reply in opposition to your argument.
While the reports continue to state that the economy is showing signs of picking up, unless the root problem is addressed with REAL JOBS, none of the reports carry any weight. Government added jobs don’t count. This is a very frustrating topic in that it’s all spin and the real truth is that unless we get manufacturing, farming, and industrial jobs back, we will not sustain any momentum. Food from Mexico, oil from Saudi, Stuff from China, and on and on . . . does it reach anyone?????????? Best advice, buy chickens, a cow, and plant a garden!!
I am to a great extent impressed with the article I have just read. I wish the writer of the-buzzz.com can continue to provide so much practical information and unforgettable experience to the-buzzz.com readers. There is not much to tell except the following universal truth: You’re never quite sure whether it’s against the law or not to have a fire in your back garden. I will be back.