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FOMC Announcement: $600 Billion, $75 Billion/Month, $110 Billion Including QE Lite, 35% SOMA Limit Removed, $27.5 Billion Weekly POMO, On Run Rate To Monetize Entire Budget Deficit
For immediate release
Information received since the Federal Open Market Committee met
in September confirms that the pace of recovery in output and employment
continues to be slow. Household spending is increasing gradually, but
remains constrained by high unemployment, modest income growth, lower
housing wealth, and tight credit. Business spending on equipment and
software is rising, though less rapidly than earlier in the year, while
investment in nonresidential structures continues to be weak. Employers
remain reluctant to add to payrolls. Housing starts continue to be
depressed. Longer-term inflation expectations have remained stable, but
measures of underlying inflation have trended lower in recent quarters.
Consistent with its statutory mandate, the Committee seeks to
foster maximum employment and price stability. Currently, the
unemployment rate is elevated, and measures of underlying inflation are
somewhat low, relative to levels that the Committee judges to be
consistent, over the longer run, with its dual mandate. Although the
Committee anticipates a gradual return to higher levels of resource
utilization in a context of price stability, progress toward its
objectives has been disappointingly slow.
To promote a stronger pace of economic recovery and to help
ensure that inflation, over time, is at levels consistent with its
mandate, the Committee decided today to expand its holdings of
securities. The Committee will maintain its existing policy of
reinvesting principal payments from its securities holdings. In
addition, the Committee intends to purchase a further $600 billion of
longer-term Treasury securities by the end of the second quarter of
2011, a pace of about $75 billion per month. The Committee will
regularly review the pace of its securities purchases and the overall
size of the asset-purchase program in light of incoming information and
will adjust the program as needed to best foster maximum employment and
price stability.
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 for the federal funds rate for an
extended period.
The Committee will continue to monitor the economic outlook and
financial developments and will employ its policy tools as necessary to
support the economic recovery and to help ensure that inflation, over
time, is at levels consistent with its mandate.
Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A.
Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K.
Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Voting against the policy was Thomas M. Hoenig. Mr. Hoenig
believed the risks of additional securities purchases outweighed the
benefits. Mr. Hoenig also was concerned that this continued high level
of monetary accommodation increased the risks of future financial
imbalances and, over time, would cause an increase in long-term
inflation expectations that could destabilize the economy.
Statement Regarding Purchases of Treasury Securities
On November 3, 2010, the Federal Open Market Committee (FOMC) decided to expand the Federal Reserve’s holdings of securities in the System Open Market Account (SOMA) to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate. In particular, the FOMC directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to purchase an additional $600 billion of longer-term Treasury securities by the end of the second quarter of 2011.
The FOMC also directed the Desk to continue to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities. Based on current estimates, the Desk expects to reinvest $250 to $300 billion over the same period, though the realized amount of reinvestment will depend on the evolution of actual principal payments.
Taken together, the Desk anticipates conducting $850 to $900 billion of purchases of longer-term Treasury securities through the end of the second quarter. This would result in an average purchase pace of roughly $110 billion per month, representing about $75 billion per month associated with additional purchases and roughly $35 billion per month associated with reinvestment purchases.
The Desk plans to distribute these purchases across the following eight maturity sectors based on the approximate weights below:
Under this distribution, the Desk anticipates that the assets purchased will have an average duration of between 5 and 6 years. The distribution of purchases could change if market conditions warrant, but such changes would be designed to not significantly alter the average duration of the assets purchased.
To provide operational flexibility and to ensure that it is able to purchase the most attractive securities on a relative-value basis, the Desk is temporarily relaxing the 35 percent per-issue limit on SOMA holdings under which it has been operating. However, SOMA holdings of an individual security will be allowed to rise above the 35 percent threshold only in modest increments.
Purchases associated with balance sheet expansion and those associated with principal reinvestments will be consolidated into one set of operations to be announced under the current monthly cycle. On or around the eighth business day of each month, the Desk will publish a tentative schedule of purchase operations expected to take place through the middle of the following month, as well as the anticipated total amount of purchases to be conducted over that period. The schedule will include a list of operation dates, settlement dates, security types to be purchased (nominal coupons or TIPS), the maturity date range of eligible issues, and an expected range for the size of each operation.
The Desk expects to conduct the November 4 and November 8 purchase operations that were announced on October 13, and it plans to publish its first consolidated monthly schedule on November 10 at 2:00 p.m.
Purchases will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions operated through the Desk’s FedTrade system. Consistent with current practices, the results of each operation will be published on the Federal Reserve Bank of New York’s website shortly after each purchase operation has concluded. In order to ensure the transparency of our purchase operations, the Desk will also begin to publish information on the prices paid in individual operations at the end of each monthly calendar period, coinciding with the release of the next period’s schedule.
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The 'news' of extra monetiation outside of the QE is noise to keep things happy - you just don't collapse the major New York Banks with a sneak punch. There's no other way you sell this.. and the market still has to go up.. but this makes the rain come from the elections. It's a smart move, little to make direction out of.. foreclosure, sov. bonds, still the biggest stories.. sideways it has to be. Money is still going to leave the markets from sources outside the Fed- so this has to be sold as a positive in the short run. Soon enough we should see a reform in the pension sector - that would be the rollercoaster.
Screw Timmy's BS stocks, look at the bonds getting slammed! Wow.
Forget today. In what way will 27 billion a week not be sufficient to ramp this market to the moon.
Because no one believes billions in imaginary dollars buying some bonds means anything but bullshit. Hey feel free to buy in!
Don't believe POMO has anything to do with market rallies, eh? Fascinating viewpoint, and good luck trading to you!
What market rally?
"C'mon we have streamers and punch, Nancy has Pom Poms and Geithner has rheteric. You ain't buying?" The donk turns around from you. "Hey guys...[Sharp whistle]...we need some new Pom Poms, get Boehner on the phone, I heard he can shake them."
This is the Fed trying to signal a new Congress to tighten up their shit.
Not going to work. The GOP House is going to do exactly the opposite, force through every kind of tax cut and subsidies under the sun. The Dems in the Senate will ram thru more social spending and massive extended UE benefits. The "compromises" from here until 2012 will amount to a gang rape of the real economy.
$600B will be spent by mid-Q2-11. They will have sleazed in another $600B on the sly during the same period. It makes no sense at all to even keep score. They will print money and inflate equities and commodities until the planet goes bust.
They have no choice.
Well folks, it sure looks like Benny wants the scam to go on for another 9 months at least before he pulls the plug. This idiot thinks stock wealth=GDP growth and job growth. I guess DOW 15k is inevitable, gold 1500, and the poor dollar is toast over the next year.
QE never stopped. Not only are they using third parties, whats the difference between anonymous billionaires and FED purchases? But they are making the large financial institutions they bought all that bullshit MBS from buy.
The whole QE 2.0 debate is BULLSHIT PROPAGANDA.
watching you pseudo economist ponder the devastating effects of QE 2.0 is nauseating. You are all clueless retards.
LOL!
One effect I wonder about (political) that I haven't seen much talk about is if this scam will be the back-door for China to unload Treasurys onto the Fed?
Interesting point. Would be better served without the last two sentences.
Wow! An intelligent comment. I concur. This is all about sopping up another batch of bad MBS, keeping the banks open for business. Truth is, the Fed now holds the most toxic paper on the planet, and....... they're busted.
The Fed is a worthless piece of crap. Breaking this $75 billion a month, as if it were to really enter the economy in any meaningful way (it's not), would be like giving everybody in America an extra $250 a month. Do the math. Hardly covers half a week's crack habit.
It's just more fucking crap from the assholes who think they can fool everybody. And Alcoholic Nativ.. is correct, most of the douche-bags commenting don't know shit from shinola. Most don't even know shinola, ergo, they only know shit. And it's mostly in their hats.
This money isn't going into the economy. It's going to BofA and JPM mostly, to paper over their stupid losses on mortgages. How fucking jack-back-assward do you have to be as a banker to lose money on mortgages? Pretty fucking stupid. They should be hung just for being morons.
Fuck everybody, except Rand and Ron Paul.
Bonds? Bonds? We dont need no stinking Bonds. Bonds are so 90s. There are no Bonds. Theres only Google, Yahoo, Apple and Amazon.
A down stock market on such a great day will not be allowed.
Not so sure about that
good point, and bad news always waits until Friday. see how they close em going into the weekend
By the way, that was one of the most significant decisions of the next two years, made by an unelected body, not 12 hours after the big "game changer" election, and 90% of Americans will never even register it.
Yup...elections are for suckers.
THis mkt ought to be going "to the MOON, Alice"
Interesting reaction from PM. Anybody have an explanation?
What reaction? News was built in, we knew this was coming.
this will show the Yuan!
A four point swing in the cash 30 yr. from intraday high to intraday low (so far) -- most I've ever seen it move.
You guys at Zero hedge had it nailed all along, thanks.
It is amazing how easily the foil can shape a custom cut fitted hat from the materials provided by the tragicomedy all around us..
I want to point out that PMs/equity markets "flash" crashed after the announcement. Sure, it did not happen in a "flash", it was over a period of an hour or so, but it is the same move as a flash crash.
I see no 'reaction' in much of anything. Cool plunge stick save earlier, but other than that whats on fire? Nothing I can see, $2 trillion baked in, $600 billion delivered, I dont see jack shit to be excited about in the least.
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Winter 2012. Coming soon to a corner near you!
after all that stimulus i need a cigarette...
I need to pack the piece...looks like I am still, "Breaking the law! Breaking the law!"
PMs at inflection point; the next major move will dictate short term behavior.
Equities are confirming inflection point.
PMs up on point!!!!!! Silver breaks resistence.
Look for anything you have heard gold bugs to remain true!
Short term upward move is confirmed. Look for silver to buck this recent range and move into the $26 range by next week.
Look for gold to move to $1400 by next week.
And this keeps all trends in line.
Look for silver to be at $36 by the Winter Solstice.
Look for gold to be at $1850 by the same day.
Bitchez.
Until it is the $ shorts turn at the next round of juicing
Fights will go on as long as they have to.
Indeed. And for good reason.
"History teaches us that men and nations behave wisely once they have exhausted all other alternatives."
- Abba Eban
Surreal how quiet equities are.
Ticking time bomb? Considering how coiled the spring has become from the essentially sideways churn over the past two weeks, you would have expected an explosion up or down after the news. Rare that WS is confused.
Oh well, there IS always tomorrow.
Equities got knocked down by volatility and then sat on by the dollar. Usually that would have equities grab gold's ankles to try to catch a move (like a kid does when they are lying on the floor and they want you to walk so they can be dragged around). Usually, gold goes along with it, and gives equities a trip around the room. Were equities too beat up? Too tired to grab gold's leg?
And about tomorrow, I think we could wake up tomorrow and we could see anything......anything. I wonder how Asia/Europe will trade the news? I know they will gun gold. But how will they treat this deathbed dollar?
I wonder when you will quit flogging your dolphin.
UR Douche-bag deluxe.
What happens today in the markets isn't the story guys. Any significant crash isn't going to happen within the confines of a single day or week.
Over night action today and where we close on Friday will be the story.
A Fed decision to monetize in order to save the economy will drive up the price of oil.
Higher oil prices will clobber the economy.
A Fed decision to monetize in order to save the economy will drive up the price of oil.
Higher oil prices will ...
Can I stop now?
Can you say "feedback loop"?
One thing I am wondering about how this will play out for the Canadian dollar, which most of you know is first and foremost linked to oil prices (which I expect to rise over the next 6 months) and secondly (but probably just as important) to the USD because they are Canada's biggest export market. Will Canada also begin some currency intervention at some point if the Canadian dollar goes above par?
And any pointers to blogs that deal specifically with the Canadian economic situation would be much appreciated (well if they exist - I've looked and haven't found much).
Lets do the math.. Approx. 5 large a day for POMO. Gee that means Google will be $9,000/ Share by next thursday. Thanks ZH. You are most helpful.
QE is the fuzziest doublespeak ever uttered. What's really going on is the
rest of the world is cutting back on buying US debt, so the Fed is creating
Benji bucks out of thin air so we can pretend there are still buyers.
Fed benjies --> US debt --> (welfare checks + food stamps + war) --> WMT GD XOM -->
(china + middle east)
Are they insane ?
Are they insane ?
Partly, and they are not alone. Throughout my life, I never could have imagined that I would buy shares of a French state-owned company in the evening of 2010, Nov. 3rd, after QE2.
Love the moniker.
I tend to agree that only the Fed, PDs and greater fools are buying U.S. debt.
Could you clarify what you mean by "china + middle east"?
The dectective says... annex the fed.. stick them with the debt.
Nothing is so bad as something which is not so bad.
- The Scarlet Pimpernel
Banks alleged to have used naked short-selling to rig market www.hbsslaw.com. (PRNewsFoto/Hagens Berman Sobol Shapiro LLP) SEATTLE, WA UNITED STATES" href="http://photos.prnewswire.com/prn/20080317/AQM144LOGO" target="_new">Download image
NEW YORK, Nov. 3, 2010 /PRNewswire/ -- JP Morgan Chase & Co. (NYSE: JPM) and HSBC Securities Inc. (NYSE: HBC) face charges of manipulating the market for silver futures and options in violation of federal commodities and racketeering laws, according to a new lawsuit filed Tuesday in the U.S. District Court for the Southern District of New York.
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Well, no that that "sell off" on "baked in" news that you've all blathered about forever didn't happen, can we get on with the decent economic numbers and earnings and put this bull shit Fed stuff behind us.
Told you several times, there was absolutely no reason to sell that news. Now, we head pretty much straight up into EOY.
Lets not get too far ahead of ourselves here. We'll see were things stand come COB friday.
Ok, so now we have to wait until Friday? And the beat goes on....Then Friday, when we're still higher, I'll be told to wait until January and on and on and on.
There will be no falling off a cliff, no KABOOM! What there will be is what the economic numbers are telling us, slow, slogging growth. Nothing more, nothing less.
All we are waiting for now is Mish to tell us QE won't work, deflation is winning and then Nic Lenoir to post his charts saying the top is in.
Nobody can say Bernanke has mislead the markets.He is carrying out his plan to destroy the dollar to the letter,the next series of bubbles is being created.
The dectective says... annex the fed.. stick them with the debt.
So PDs bid up stocks, but the companies know that the consumer is still deleveraging, so why would they hire more people? We can inflate TBTF bank reserves, the national deficit, and stock prices, but if no one wants to borrow money, how does the exercise help the real economy?
I wish Congress would grow a spine and refuse to raise the debt ceiling, that would be glorious.
If they are going to piss away $600 billion, they might as well just send a check for $2,000 to every man, woman, and child in the country. At least it would give people the illusion of a benefit.
You've got it exactly right. $2000 per person, a one-off, isn't enough. Which is why the whole thing is a big lie and a facade for the continuation of the master plan of destroying the middle class. I'm telling you, Ron and Rand Paul are about our only hopes.
Lawrence O'Donnell on CNBC was getting all hot and bothered after Rand Paul's speech (which was pretty neat, actually, and I hope he meant it), that Rand paul will have to filibuster raising the debt ceiling, which would, according to Lawrence, plunge the entire world into a depression. Talk about irratonal exuberance! I think the Repubs let the clock run out on the debt ceiling once, in 1996? maybe, and nothing happened. Just like today. Nothing. No earth-shattering smack. Nada, zilch, crapola.
It's all a lotta crap, but it will blow up AGAIN.
Let us all get away from POMO and the FED and QE2 and focus on fucking over Bank of America and all the shitty loans they bought from Cuntrywide. Yeah, that's the ticket.
Here is what was actually said by the TABC:
"The presenting member stated that the market expects the Federal Reserve to purchase $100 billion per month, as well as $30 billion per month in MBS reinvestments. This will total $1,560 billion in Treasury purchases over the next year. The member stated, however, that market participants believe the Fed will leave the status of QE2 open ended, with purchases ultimately dependent on economic conditions. The presenter also noted that the program should last six months to two years."
That is $1.56 trillion per year and totals $3.12 trillion if it runs the full two years. And it won't be just 6 months. It can't, because none of this fixes anything so they have to go on pumping because that is all they know how to do.
In my best Beavis voice: "He said 'member.' Heh, heh, heh, heh. Heh, heh, heh, heh. Heh, heh, heh, heh.Heh, heh, heh, heh.
Sorry Greyzone, it was too tempting.
The Fed has NO mandate to manage inflation by debasing the currency..absolutely none!! They are minipulating what their true mandate is......which is to maintain the purchasing power of the dollar. They are criminals with weak minds and should be treated as such.
the fed has several mandates, all self conflicting. Bernanke said in testimony,that the dolalar is not his problem, though few were listening, and fewer still hold him to it, e could if he so thought it right, to be a strong (or weak) dollar activist.
secondly the Fed can create new issues, debt, but he can't monetize that debt, and he can actually put cash into bank reserves, but he can't get that money into the economy, that takes an act of fiscal legislation.
if his goal is to bid up asset prices, that would put money into the pockets of mortgage holders. if for instance you held a million dollars of debt at 5% and rates drop to 2 1/2% you can sell that debt back (or borrow against your artificially inflated equity value) and make money. one fed plan is to reinflate the housing bubble. (it worked so well the first time). problem is this time the banks will be forced to follow some rules, and personal income is worse now, meaning fewer people qualify for a loan.
the second objective is tied to the first, which is to keep corporate profits and GDP on the rise, without a parallel rise in inflation. at an extreme you might buy a half million dollar house (2500 sq ft) on a 50 year 2 1/2% loan, the car you want is more expensive, but the 0 APR and a ten year loan, with a ten year warranty (with plenty of restrictions) . Who would buy a five year old car which is only half paid for, no one. That's your problem. The corporate game plan is to sell you more than you need, and things you can't use. and no discount for cash
and on we go.
Is anyone still short this market, knowing now there is going to be POMO every other day? Also, Nov to Dec are usually bullish.
Biggest short in history huh?
Not yet.
That ship has sailed. There are only 200B stars in the Milky Way galaxy.
Ben said on April 28th;
"The path forward contains many difficult trade-offs and choices. But postponing those choices and failing to put the nations finances on a sustainable long-run trajectory would ultimately do great damage to our economy." - Ben Bernanke, April 28 2010 - US Deficit Hearings.
In other words; if Washington won't do anything policy-wise about this mess, as they are supposed to, and instead leave it all up to me, then don't be at all surprised how badly I fuck it up.
Clear?
Obama's budget director jumped ship soon after ... followed by all the rest, once it became clear they had no purpose in life (or policy).
But the more immediate problem for Barry is how to get a budget passed.
That's going to be very 'interesting' to watch, and I've noticed no one is really saying much about this like issue ... like, for the past several months.
Or was that the plan? Make Reps and Tea-bags pull the austerity-trigger for Bazza, thus take the heat for the promise to 'halve' the US deficit by the end of his first-term?
Dumb, but cute. Welcome to the first ripples of national austerity non-policy. Frankly, I can not believe how badly Obama has blown his opportunities.
Keep in mind that austerity is rationing, and while rationing evolves and can last for decades, it's also the ideal framework for containing inflation and moderating supply and demand bumps (and dealing with devaluation) in daily food and necessities.
i.e. It's what you need to combat runaway inflation, like, once you go down the path of MMT-Heavy, which is what is effectively happening, minus any real plan.
I'm pretty sure rationing is going to be necessary ... so get ready to loose your pride if you are an independent self-reliant type, (your veg garden might get nationalised as well).
Hilary will resign mid-2011 before things get REALLY bad and position for 2012 (which is what Bill has been doing for the past few weeks, and what she was doing with the West Bank thing, that Bill could not close before vacating the Office)
In other words, the pending banking system collapse, from snowballing defaults will be the real driver of events, not stale stalled party politics and policy, on any level.
The politics is only significant with respect to how much worse they make it, or how long they can delay it, or how much they allow the US FED a freehand to test MMT budget and debt theories before the collapse.
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Interesting to read all the new responses, thanks for all the current news and updates. Hope to read more very soon.
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