FOMC announcement as expected brought the horns on the Euro, honking down 5% in amatter of minutes. The FOMC seemed to have extended its dovish language for this meeting as well taking the opportunity tio extend $245 B of Operation Twist. That extension was a foregone conslusion for securities already invested as any sell off from the Fed would be hell’s whistles for the US Economy
Ben Bernanke speaks to the press in Two hours. Except for the euro easing off, Dollar will also start losing value from here, the Aussie taking the lead as the Euro settles down near its 1.25 support levels
In Operation Twist the Fed is still buying longer term paper ( and it should, the amount in Treasuries on its asset announcement weekly is too lopsided, with the Fed extensively relying on Treasury Bills!!)
Here’s the Statement as caught by Marketwatch( Thanks guys) As usual 2Fed’s analysis more or less agrees with ours here..Till last week, the FEd was buying a duration of 8 years in the planned range of 6-30 years
“Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, 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 expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today 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 late 2014.
The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions 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; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.”
Related articles
FOMC: Let’s Twist Again?(247wallst.com)
The Fed: Once Again Behind the Curve and Scrambling to Catch Up…(delong.typepad.com)
Related Reading:
Investment Banker in salesclothes
