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Fed Announcement: No Change, "Exceptional" And "Extended" Language Remains, Vote 9-1, Hoenig Did Not Want "Extended Period"
Information received since the Federal Open Market Committee met in
January suggests that economic activity has continued to strengthen and
that the labor market is stabilizing. Household spending is expanding
at a moderate rate but remains constrained by high unemployment, modest
income growth, lower housing wealth, and tight credit. Business
spending on equipment and software has risen significantly. However,
investment in nonresidential structures is declining, housing starts
have been flat at a depressed level, and employers remain reluctant to
add to payrolls. 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 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 has been purchasing $1.25 trillion of agency
mortgage-backed securities and about $175 billion of agency debt; those
purchases are nearing completion, and the remaining transactions will
be executed by the end of this month. The Committee will continue to
monitor the economic outlook and financial developments and will employ
its policy tools as necessary to promote economic recovery and price
stability.
In light of improved functioning of financial
markets, the Federal Reserve has been closing the special liquidity
facilities that it created to support markets during the crisis. The
only remaining such program, the Term Asset-Backed Securities Loan
Facility, is scheduled to close on June 30 for loans backed by
new-issue commercial mortgage-backed securities and on March 31 for
loans backed by all other types of collateral.
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 continuing to
express the expectation of exceptionally low levels of the federal
funds rate for an extended period was no longer warranted because it
could lead to the buildup of financial imbalances and increase risks to
longer-run macroeconomic and financial stability.
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Current Statement
"The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability."
Previous statement
"The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets."
Is this a QE hedge?
Sort of.
It gives the Fed the opening to expand the balance sheet, if needed, to scoop up freshly printed Treasury debt.
In other words, the Fed will make sure these auctions go well and that the coupon remains low-- come hell or high water-- unless there happens to be a serious run on the dollar, or in inflation comes back blazing saddles.
The FED is just phoning it in now.
The grand experiment will continue... until it ends in a mushroom cloud.
Yawn
It sounded to me like they left the door open for more QE. While they said the purchases would be winding down, they also followed up that statement by saying they will continue to monitor the situation and standat the ready with their monetary tool box.
That is a very big open door. There was no statement that said "NO ADDITIONAL QE".
It sounds to me like they were listening to;
The Machine That Goes "PING"!!
http://www.youtube.com/watch?v=NcHdF1eHhgc
breath little economy, breath -- puleeeeze breath.
I was wondering what the "Ping" reference was from. Thanks.
Between Fed meetings I picture Ben sitting around tossing cards into a hat with that headline news music blaring - itching to pull out reams of paper and three ring binders in front of Congress and the MSM to overwhelm the people with the data used to 'forecast' the American consumer's spending patterns and global money flows.
DO NOT DEFLATE! DO NOT DEFLATE! DO NOT DEFLATE!
well, they are winding down the special lending facilities because they went and BOUGHT all the trash!
Free money! Banana Ben and the Printing Press to continue to drop dollars from helicopters. Market takes off! Wheee...
Indeed so, free money to buy more junk stock
My problem is the Fed just made it really easy to take dollars out of the bank (which I do regularly because those ass clowns will dirty it).
But, I need dollars and don't want to go changing gold 'n silver every month. Since the dollar will be depressed along with purchasing power, any other ideas as opposed to the slow bleed of keeping a war chest full of Fed debt? THE ONLY good thing so far is gas is a dime cheaper cuz I'm always holding a gangster-roll of cash. :\
The Fed's got a rough job announcing every 6 weeks they don't feel like doing anything.
No demand for paper+infinate printing=DISASTER
This is, of course, what the Fed wants in the long run. Order out of chaos, so as the Phoenix can rise once again.
By my calc, Fed should have begun to raise rates last summer if they wanted to chase inflation. If they wanted to let inflation rise a little, they would have begun rate hikes last fall. If the raise had begun in Winter, then a medium amount would have been the prescription. If they had raised today, then they would have wanted a large amount of inflation. Now, I believe, they want inflation BIG!!!!!!!! Obviously, they should have never lowered rates to begin with.
Hot potato passing
Who will be left with burnt hands
Maybe man will not be crucified on a cross of gold, but it might be poetic justice to put Ben atop a pile of some of the trillions of dollars he has created and do a Joan of Arc exit strategy.
They require more time to buy generators and fuel their jets.
OT: Notable Put/Call ratio of .11 on SRS today.
The bond market sez QE2 is on zee way.
We need some ph**king leadership in this country. No change just another dope.
With the problems that will be coming....I think we will need more dope!
I expect a certain sovereign investor will be dumping a lot of long dated US bonds tomorrow. Then US CDS will go up and they will blame "speculators."
Green chutes in continued need of fertilizer.
Fed to continue manufacturing of fertilizer.
At what point can this behaviour by Da Fed no longer be called "exceptional"?
Because it would seem the "Sell By" date on that phrase has passed some time ago.
Hoenig is right the rest of these guys are clowns as usual.
Read between the lines: GREEN LIGHT TO KEEP BUYING RISK ASSETS FOR AN "EXTENDED PERIOD"!!!!
Won't QE be necessary for as long as there aren't enough buyers of U.S. debt?
As Sinclair says, "QE to infinity"
Translation: "We intend to keep rates low and subsidize our corrupt financial system in favor of seniors living on a fixed income for a prolonged period of time. Not only that, we are prepared to extend our bailout of the housing market as conditions warrant, and will do whatever it takes to make sure the upcoming wall of Treasury auctions goes off successfully. We can do all this... because we can."
Those effers. I want to borrow at 0% also. If so, I wouldnt be complaining....these FOMC (Full Of Morons Committee) meetings should not occur unless there is a change in their assessment of the economy. We dont need an excuse to ramp up the markets everytime these dopes on a rope decide to open their mouths.
No one has said it but I know everyone on ZH believes it. They are keeping rates low to maintain the mirage of banking solvency in the US. Many are insolvent anyway, but raise rates and instead of 3-4 closures a week that number would likely double. FDIC can't handle the truth. :-)
Conditions are actually pretty good for the Fed to artifically depress rates at the short end of the curve, so that banks can earn (I use the term loosely) their way out of insolvency. They will likely continue to intervene in the Treasury markets if there are no alternative buyers-- at least in the near term.
The strategy will fail when/if one of two things happen: (a) global resource untilization improves to the point that commodity inflation will be hard to contain (read, oil); and/or (b) global investors lose faith in the dollar and treat it like an ugly stepchild.
Given current global market conditions, this game can play on. What will be interesting to see is whether the Fed will impose tough love on the mortgage and banking system, and at least partially allow asset prices to clear. I think whatever QE we'll see will be to (indirectly) save the Treasury auctions.
But if the FDIC can't handle the truth...
The last lot of TIC data didn't show a lot of global confidence in US assets!
If one is a regular reader of ZH, one would know that it is not merely the FDIC that can't handle the truth but the surging United States budget that can't handle the truth. As the cost of that massive debt issuance, will explode in an untenable manner, as soon as rates start their ascent.
So....the bank subsidies continue on the backs of ma and pa retirees. Why does Hoenig even bother with this shitty little vote? He should instead blow the whistle.
You never had the privilege to take Bubble Ben's Capitalism 101 at Princeton? It goes something like this:
You have just earned 3 credits for reading Bubble Ben's main thesis.
lol good summary. That was a summary right?
I was fortunate, or unfortunate to have an Econ prof who didn't believe in Keynes and unbridled fiscal and monetary stimulus. He also called for USD/CAD parity back in 2000. He drove a rust ass beater to work.
Rational thought = poor house. Believing in BS with the lemmings = We're RICH BABY!!!
WOOOO!!!!
That was actually pretty good, Leo.
Echo. Bubble.
Echo. Pop.
Guess CRE is rehearsing and soon to open at a theater of the absurd near you.
I guess the Chinese are to polite to complain about US interest rate manipulation?
here's a chart for you.
is it oct 2007 through mar 2010?
http://4.bp.blogspot.com/_TwUS3GyHKsQ/S5_zDRYp4RI/AAAAAAAAEcw/LinRXWYrk0A/s1600-h/2010-03-16-PROPHET.png
Both The Fed and BoE will implement some type of new QE scheme before the year is out...
I would have to say that the statements made exceed even the FEDs capacity for BS. They must look around at each other and think is anybody going to buy this crap? I wonder who the statement is written for? The politicians? Certainly not wall street and the big banks.
So if it is to apease the general public, one has to wonder why bother. Maybe if the people new the true facts, the politicians may feel some heat? Perhaps. But to masquerade the economic facts to the tax payers of the US seems preposterous. As in by saying something it will some how come true. The FED must realize that the tax payer is tapped out.
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It is clear that the FED does not release truthful information to the public. But, do they tell the real facts to the President and the cabinet? One can only hope so.
Mark Beck
Zero interest rates and pertpetual maturities and we can all live happily ever after....
Yeah, too much bleeding.
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