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Goldman FOMC Post-Mortem: "Slightly More Hawkish Then Expectations"

Tyler Durden's picture


Via Goldman Sachs,

The FOMC decided to cut the pace of its asset purchases to $75bn/mo, but offset this with a qualitative enhancement to the forward guidance. The Committee's assessment of the economic outlook was somewhat more upbeat. We see today's statement as slightly hawkish relative to expectations. The fact that President Rosengren dissented and President George did not is consistent with that.


1. The Committee reduced the monthly pace of its asset purchases to $75bn, trimming both Treasury and MBS purchases by $5bn. Regarding the forward-looking outlook for further cuts to purchases, the statement indicated that "the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases." The reduced pace of purchases will take effect in January and the allocation of Treasury purchases across maturities will remain unchanged. The Committee likely expects to conclude the asset purchase program in the second half of 2014.

2. Additional qualitative forward guidance was provided. Specifically, "the Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal." We see "well past" as potentially representing as much as one-half percentage point. In this sense it is similar to a reduction in the unemployment threshold to 6.0%, although without the degree of commitment that such a reduction would entail.

3. The economic assessment was somewhat brighter. In particular, "labor market conditions have shown some further improvement" was upgraded to "labor market conditions have shown further improvement." In addition, the assessment of the drag on growth due to fiscal policy was slightly more upbeat, noting that "the extent of restraint may be diminishing." The description of inflation was unchanged in the first paragraph, although the Committee added that it is "monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term," indicating slightly higher concern about the inflation outlook.

4. Boston Fed President Rosengren dissented to the decision to taper asset purchases, while Kansas City Fed President George?who had previously been a hawkish dissenter?voted with the Committee.

5. With regard to participants’ economic projections, the mid-point of the central tendency of the unemployment rate was lowered to 7.05% in 2013Q4, 6.45% in 2014Q4, 5.95% in 2015Q4, and 5.55% in 2016Q4. Real GDP growth was raised by 10bp to 2.25% at end-2013, but the longer-run projection was reduced by 5bp to 2.3%. Participants reduced their end-2013 and end-2014 core PCE projections by 10bp to 1.15% and 1.5% and reduced their end-2015 and end-2016 projections by 5bp to 1.8% and 1.9%.

6. The median participant’s forecasts for the funds rate (the “dots”) remained at 0.13% at end-2013 and end-2014, fell 25bp to 0.75% at end-2015, and fell 25bp to 1.75% at end-2016. The median projection for the longer-run rate remained 4.0%. It is possible that Vice Chair Yellen was one of the participants who reduced their federal funds rate projections.


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Wed, 12/18/2013 - 16:54 | Link to Comment doggis
doggis's picture


Wed, 12/18/2013 - 16:57 | Link to Comment 1835jackson
1835jackson's picture

Sit back and look at the markets and then tell me with a straight face that everything is just fine and that the numbers are at a fair value. 

Wed, 12/18/2013 - 16:59 | Link to Comment GolfHatesMe
GolfHatesMe's picture

Need a lot of Beta blockers to have a straight bearded face

Wed, 12/18/2013 - 17:06 | Link to Comment disabledvet
disabledvet's picture

we'll see how equities respond tomorrow. that was one hell of a round trip on the 5 year as the shorts were utterly exterminated and the long gold thesis continues to get taken to the woodshed. "don't fight the Fed" takes on a whole new meaning today as "Reliant" gives as good as she gets...

Wed, 12/18/2013 - 16:56 | Link to Comment max2205
max2205's picture

I've never heard so much BS in my life

Wed, 12/18/2013 - 17:12 | Link to Comment Grande Tetons
Grande Tetons's picture

Ahhh to be young again. 

My son, bullshit comes after the bottle or the tit and will last the rest of your life. 

Sorry...Santa is bullshit is the Easter Bunny 

Wed, 12/18/2013 - 16:59 | Link to Comment buzzsaw99
buzzsaw99's picture
Goldman FOMC Post-Mortem: "Slightly More Hawkish Then Expectations"

Than, Then, what's the dif? /grammar nazi

Wed, 12/18/2013 - 17:01 | Link to Comment Yellowhoard
Yellowhoard's picture

Major pet peeve here.

Nobody, including Zero Hedge, seems to know the difference between the words 'then' and 'than'.

The headline should read ... Hawkish THAN expectations.

Wed, 12/18/2013 - 17:01 | Link to Comment buzzsaw99
buzzsaw99's picture

i don't mind that shit but not in the damned headline, puhleeze!

Wed, 12/18/2013 - 17:21 | Link to Comment SheepDog-One
SheepDog-One's picture

Basic grammar no longer matters, it's all about the semis full of money making their deliveries.

Wed, 12/18/2013 - 16:59 | Link to Comment Stoploss
Stoploss's picture

Ben's trying to save face an go out with a taper.




Everyone may want to clear a spot in the back yard for the upcoming helicopter drops of cash into our back yards.

That also just solved the amazon drone usage issue as well...

Show us what you got Jan.

Wed, 12/18/2013 - 17:02 | Link to Comment firstdivision
firstdivision's picture

A simpler analysis from GS should have read "hahaha!  You stupid fucks should have bought the market when it dipped below the Feds Balance sheet price. "

Wed, 12/18/2013 - 17:01 | Link to Comment thismarketisrigged
thismarketisrigged's picture

i hope every single person who works at goldman sachs fucking dies, u fucking dirty fucking bastard thieves.


ya, keep fucking receiving your free money u fucking pigs and choke on it.

Wed, 12/18/2013 - 18:53 | Link to Comment dragoneyes74
dragoneyes74's picture

Taper schmaper.  The big takeaway from today is the only thing I've had any confidence saying amid all the uncertainty: the Fed sincerely believes it can wind down QE, and the economy will achieve escape velocity and continue on unaffected.  And I, like everyone else who knows better, have to just close my eyes and hit the buy button.  So the bubble gets bubblier.  It's good for me personally, it just has ZERO chance of working and will cause unnecessary suffering for a lot of people struggling to survive when the rubber eventually hits the road.  And I find it a little disturbing that so many people don't understand there is no free lunch.  But, whatever, all I can do is navigate what's in front of me the best I can.  

I was too afraid to hold my short gold/yen positions into the announcement but once they started rolling over, I shorted both, and silver, and got long the indexes and a handful of the strongest stocks.    

We have to get through tomorrow with no change of mind from the big money, but it seems clear sailing in the established trends for at least a month or so.  The debt ceiling issue lingers out in Feb, and while no one believes we won't raise it, the pattern has been big money selling first to take profits and lead it lower, then buying first when Boehner concedes in a press conference a week before the deal gets made.   Of course, anything can happen, but trends this strong will require a catalyst to change and it's not likely to be an inverted V top when it happens.  I'd like to see the indexes hold the new highs without pulling back when they happen, though. 

The big moment for the metals looks like it's just around the corner.  Don't kill the messenger, I don't like it either, but if gold and silver break their June lows and don't find a wall of buyers that recapture those lows and close in a hammer, they are going much lower.  If it happens, I'll tell you why I believe this, but I will have a $9 target for silver.  Personally, I'm hoping for a reversal, but it appears increasingly unlikely.  We'll see.  

The massive imbalance in the Yen trade will likely force the commercial longs to bail out and look to slow the storm of shorts at a much lower level, a lot like the crazy move in silver in 2011. 



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