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FOMC Minutes Indicate No Shift In Fed's Views, Even As Many Members See More Easing Likely Warranted
The thoughts of the FOMC from a mere three weeks ago - before a 30bps rise in 10Y yields (40bps in 30Y), 5% rise in the NASDAQ, 8.5% rise in AAPL, and 85bps compression in Spanish bond spreads - are out. It appears little has changed in their muddle-through, always at-the-ready, wish-it-were-better view of the world. Via Bloomberg,
- *FOMC PARTICIPANTS SAW ECONOMY DECELERATING AFTER JUNE MEETING
- *MANY FOMC PARTICIPANTS SAID MANUFACTURING WAS SLOW OR FALLING
- *FOMC PARTICIPANTS DISCUSSED QE, EXTENDING 2014 FORECAST ON RATE
- *FED STAFF SAID MARKETS HAVE LARGE CAPACITY TO HANDLE MORE QE
- *MANY FOMC PARTICIPANTS SAW NEW QE AS BOLSTERING U.S. RECOVERY
- *MANY ON FOMC FAVORED EASING SOON IF NO SUSTAINED GROWTH PICKUP
Translation: "Many on FOMC want the S&P at all time highs without actually doing any QE, ever, because that will mean the Fed is officially out of bullets"
Pre: 10Y 1.738, ES 1406.5, Gold 1637, Oil 96.6, EUR 1.2472
Post: 10Y 1.735 unch, ES 1411.5 +5, Gold 1647 +10, Oil 97.05 +.45, EUR 1.2515 +43
On inflation expectations:
Most members continued to anticipate that, with longer-term inflation expectations stable and the existing slack in resource utilization being taken up very gradually, inflation would run over the medium term at a rate at or below the Committee’s objective of 2 percent. In contrast, one member thought that the economy may be operating near its current potential and, thus, that maintaining the Committee’s current highly accommodative policy stance well into 2014 would pose upside risks to the inflation outlook.
Thank you Lacker.
The key section from the minutes that is briefly pushing stocks higher:
Many members expected that at the end of 2014, the unemployment rate would still be well above their es-timates of its longer-term normal rate and that inflation would be at or below the Committee’s longer-run objective of 2 percent. A number of them indicated that additional accommodation could help foster a more rapid improvement in labor market conditions in an environment in which price pressures were likely to be subdued. Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a sub-stantial and sustainable strengthening in the pace of the economic recovery. Several members noted the bene-fits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action. One member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high. At the conclusion of the discussion, members agreed that they would closely monitor economic and financial devel-opments and carefully weigh the potential benefits and costs of various tools in assessing
On what form the future QE may be - first LSAP
One of the policy options discussed was an extension of the period over which the Committee expected to maintain its target range for the federal funds rate at 0 to ¼ percent. It was noted that such an extension might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed. Participants also exchanged views on the likely benefits and costs of a new large-scale asset purchase program. Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly. In addition, some partici-pants noted that a new program might boost business and consumer confidence and reinforce the Committee’s commitment to making sustained progress toward its mandated objectives. Participants also discussed the merits of purchases of Treasury securities relative to agency MBS. However, others questioned the possible efficacy of such a program under present circumstances, and a couple suggested that the effects on economic activity might be transitory....Several worried that additional purchases might alter the process of normalizing the Federal Re-serve’s balance sheet when the time came to begin re-moving accommodation. A few participants were con-cerned that an extended period of accommodation or an additional large-scale asset purchase program could increase the risks to financial stability or lead to a rise in longer-term inflation expectations.
Then IOER rate cut:
Some participants commented on other possible tools for adding policy accommodation, including a reduc-tion in the interest rate paid on required and excess reserve balances. While a couple of participants favored such a reduction, several others raised concerns about possible adverse effects on money markets. It was noted that the ECB’s recent cut in its deposit rate to zero provided an opportunity to learn more about the possible consequences for market functioning of such a move. In light of the Bank of England’s Fund-ing for Lending Scheme, a couple of participants ex-pressed interest in exploring possible programs aimed at encouraging bank lending to households and firms, although the importance of institutional differences between the two countries was noted.
On the phrasing of the statement:
With respect to the statement to be released following the meeting, members agreed that it should acknowledge the deceleration in economic activity, the small gains in employment, and the slowing in inflation reflected in the economic data over the intermeeting period. Because most saw no significant changes in the medium-run outlook, they agreed to continue to indi-cate that the Committee anticipates a very gradual pickup in economic activity over time and a slow de-cline in unemployment, with inflation at or below the rate that it judges most consistent with its dual man-date. Many members expressed support for extending the Committee’s forward guidance, but they agreed to defer a decision on this matter until the September meeting in order to consider such an adjustment in the context of updates to participants’ individual economic projections and the Committee’s further consideration of its policy options....Consistent with the concerns expressed by many members about the slow pace of the economic recovery, the downside risks to economic growth, and the consider-able slack in resource utilization, the Committee decid-ed that the statement should conclude by indicating that it will provide additional accommodation as need-ed to promote a stronger economic recovery and sus-tained improvement in labor market conditions in a context of price stability.
Full minutes:
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Time for war and the mother of all pussy riots. Unilateral or joint attack by Israel and US against Iran, leading to cyber counterstrikes by Russian and Chinese hackers that bring US financial markets to a standstill. Plan for that Ben.
"mother of all pussy riots" ... nice
Translation:
The Bernank (speaking for the collective borg):
C'mon, Bernank. QE3 bitch! Let's see that big $5.00 for a gallon of 87 octane!
Don't forget the additional drop in house prices too!
The question i have for the FED would be that, since they are using velocity of money to keep " inflation tame " ( it is lower than the level in 1933 ), while food and energy continue to rise, what exactly do they expect to happen when the velocity of money reaches zero??
The FED is the sole reason there is no velocity of money, due to the obvious unescapeable fact they have ordered banks NOT TO LEND, to specifically keep their inflation target artificially low, to allow them to use this endless bullshit game of we're ready if need be.
Further velocity supression will be required in less than thirty day's.
I mentioned this the other day -
I'm poor and rent where I live is way higher than a mortgage, so I got one from a local credit union.
I asked the loan officer if the mortgage would ever be sold to another party, he said, "Oh, no, never!"
30 days later I got a letter in the mail saying that Fannie Mae now owns my loan.
Local credit union has cash, American tax payer holdes note for my crumbling 1957 rambler.
"Stoploss The FED is the sole reason there is no velocity of money, due to the obvious unescapeable fact they have ordered banks NOT TO LEND, to specifically keep their inflation target artificially low, to allow them to use this endless bullshit game of we're ready if need be.
Further velocity supression will be required in less than thirty day's."
Exactly just in time to save obama it's a two fer if they had done it in August with Republicans complaining they wouldn't have an excuse other then politics for when they do it in September.
Congressional Republican's to Bernanke: Do less, not moresnip
Judging from recent economic commentary, there are plenty of economists who think the Federal Reserve needs to do much, much more to juice the U.S. economy. Scott Sumner, Paul Krugman, and the Economist have all lambasted Fed Chairman Ben Bernanke on this front.
But in Congress, this view seems curiously absent. On Thursday morning, Bernanke testifiedbefore the U.S. Congress Joint Economic Committee. Republicans at the hearing were quick to criticize the Fed chairman over recent reports that the central bank might contemplate more “quantitative easing” — the so-called QE3 — to jump-start the stalling recovery. Very few Democrats, however, offered any sort of counterbalance. At the moment, most of the political pressure on Bernanke is to do lessstimulus, not to do more.
“I wish you would take QE3 off the table,” said Texas Rep. Kevin Brady, the ranking Republican on the committee. “I wish you would look the markets in the eye and say that the Fed has done too much.” Similarly, Sen. Jim DeMint (R-SC) complained to Bernanke that many of the stimulative measures the Federal Reserve has taken “are giving us a false sense of security.”
But what about Democrats? The ranking Democrat on the committee, Sen. Bob Casey, merely inquired, in a neutral tone, whether the Federal Reserve was planning to take further action. Bernanke simply replied that the Fed was still contemplating the matter, and a lot depended on whether “there will be enough growth going forward to make material progress on the unemployment rate.” (Fed officials meet on June 19 to discuss their next steps.)
Indeed, the harshest grilling that Bernanke got on the Democratic side was from Sen. Bernie Sanders (I-Vermont), who was more interested in criticizing the Federal Reserve for various conflicts of interest — the fact that, for instance, Jamie Dimon, the CEO of JPMorgan, still sits on the board of the New York Fed. About the only liberal encouragement Bernanke received was from Rep. Carolyn Maloney (D-N.Y.), who said, “I believe that the Fed should use any tool in its arsenal to provide support to our fragile economy.”
As far as the money market argument....
"Some participants commented on other possible tools for adding policy accommodation, including a reduc-tion in the interest rate paid on required and excess reserve balances. While a couple of participants favored such a reduction, several others raised concerns about possible adverse effects on money markets."
Alan Blinder crushes that argument
"The Fed has steadfastly opposed this idea for years. Why? One objection is true but silly: Lowering the IOER might not be a very powerful instrument. No kidding. Are there a lot of powerful instruments sitting around unused?
The other objection is that making the IOER zero or negative would push other money-market rates even closer to zero than they are now, thereby hurting money-market funds and otherwise impeding the functioning of money markets. My answer two years ago was that we have more important things to worry about. My answer today is that it has mostly happened anyway: U.S. money-market rates are negligible
It is noteworthy that the European Central Bank just jumped ahead of the Fed by cutting the rate it pays on bank deposits to zero—and European money markets did not die. Denmark's National Bank went even further, dropping its deposit rate to minus 20 basis points. Yet the Little Mermaid still sits in Copenhagen harbor.
The Fed's hostility toward lowering the interest on excess reserves is almost self-contradictory. When Mr. Bernanke lists the weapons the Fed plans to use when the time comes to tighten monetary policy, he always gives raising the IOER a prominent role. His reasoning is straightforward and sound: If the Fed makes holding reserves more attractive, banks will hold more of them. Why doesn't the same reasoning apply in the other direction?"
I must say I disagree. If the Fed truly is not Qe'ing the market, then they have successfully used QE. Think about it, if they haven't been expanding the money supply for QE, but their leading promises of QE are forcing the market higher, then the plan actually worked marvelously. Above and beyond this, this also means they can keep bond yields remarkably low, and we can see these days where bonds explode higher and the market also moves higher, thereby negating the correlation between the two. At the same time, the increasing market forces the dollar down and establishes Euro strength.
Now while none of this fixes Europe in a long term sense, it still establishes the U.S. in a position of strength. The real question that remains, what eventual impact will exploding PM values have on the value of fiat currencies like the U.S. dollar.
More importantly, what happens to the value of the dollar, if the U.S. isn't able to uphold the Petro-Dollar Accord? Will it require the U.S. to go to war with China and Russia in order to enforce Opec's compliance? This to me, is the greatest threat to the dollar. Forget everything else, the dollar hinges on the success to intimidate the Opec nations to obey the Petro-dollar accord.
Dear Tyler and fellow ZH'rs...
What are the chances right before...'they'...hit the Q...E...3 button...
'Someone' -
BAM! - hits the false flag button?
Who needs QE3 when a massive war is happenning in the ME/NA region and abroad?
A possibility?
These pyschopaths are highly intelligent and have tricks up their sleeve(s) that we havent even covered yet - as smart as we ZH'rs are...they are smarter...and have more money...and more resources...and more connections, etc...
Stay tuned...and 'in tune'
I'm not sure it's fair to say they're smarter, as that implies capacity... however, there is certainly an information gap that is punitively exploited, which has the same effect.
Their biggest advantage is a complete lack of conscience and single-minded focus on maintaining power, wealth and position for the status quo.
Of course, it's their greatest weakness as well...
If this occured, spending would hit the shitter (real more badder than it already has) as people watch the embedded 'reporters' covering the US's new empire building project. Say hello to my little Great Depression III.
That's why Bush Jr. Inc. pleaded with people to continue to be as shallow as normal and get out there and 'buy buy buy'.
If the market goes down enough, then the easing will come. QE to infinity is assured.
http://ericsprott.blogspot.ca/
Same old, same old, waffle, lie, waffle, lie, scratch head, waffle, lie, lie, lie...
Risk onff
+1
Scizophrenic, broken, Bernank'd markets.
#offriskon
but but but steve lies-man i suck a fatty says we are this close to qe3.
We'd need a time machine to get back to QE3.
QE1, QE2, QE lite (QE3), Twist (QE4), Twist 2 (QE5).
And until Steve Liesman personally sucks my fatty, I will never believe anything but pie goes into that hole.
To a fiat crack addict >this close< is good enough for a Placebo Effect high.
[sigh]
Was that as good for you as it was for me?
Ever huff on toner? It feels like I'm walking on sunshine.
http://www.youtube.com/watch?v=8z3aOmr7mRo
It depends on what your definition of "this" is.
manufacturing has been falling since the end ofWW2
easing soon means keep them rates down at any cost..
soon as them rates go up, game over.
and the EUR/USD clears 1,25!
PM SPOT PRICE ROMAN CANDLE BITCHEZ
What's the difference between ignorance and indifference?
I don't know and I don't care.
-FOMC Joke Around 2012
The bullshit continues as the EUR/USD takes some viagra. There will be NO QE3 until BOTH the economy and the equity market are in the tank!
They don't have to ever do QE...they could just claim to be willing to and that seems to move the markets plenty.
this has gone far past being pathetic.
Why not just create trading algorithms that never really sell?
Oh, wait...
I guess that explains the massive volume buying /ES.
No reason for QE3 with markets up near highs. Just talking about it runs it up so no reason to ever implement it.
Marketwatch apparently reporting discussions regarding QE3, of course in the context that it's a lock-up.
bubbles bubbles, everywhere
Some douche on CNBC just took credit for the word "hopium"....
Doesn't matter. You're probably one of the ten people watching CNBC today that actually saw that.
you mean to tell me someone actually listens to CNBS??
The guys name is Brian Sullivan, and he's a fucking sock puppet!
There goes the Leisman spin on CNBS about QE3 coming in September. These people have a god complex thinking that they have the ability to wave a QE wand improve the economy and we all live happily ever after. It's only a matter of time before this house of cards comes tubbling down.
When rates go up, they have to print. Now, what's the interest payment on that debt at higher rates?
It's a problem.
We need to start looking at stock charts from Zimbabwe again. I wonder if the algo's are programmed for those patterns?
The interest rate is whatever the Fed wants it to be. They ARE the market. ZIRP is just another way to monetize the debt.
And yes, the comparison to Zimbabwe is accurate.
Well, well, well...what have we here.
“Those wondering why the Department of Justice has refused to go after Jon Corzine for the vaporization of $1.6 billion in MF Global client funds need look no further than the documents uncovered by the Government Accountability Institute that reveal that the now-defunct MF Global was a client of Attorney General Eric Holder and Assistant Attorney General Lanny Breuer’s former law firm, Covington & Burling.” http://peterlbrandt.com/what-is-the-real-reason-jon-corzine-will-not-be-...
Corzine and Holder should have done to them what Howard Stern did to Horse last night on AGT. fuckers.
SNB needed some help getting their 1.2500a filled:)
Short the pops.
Doubt will creep in fast here.
one of the rare days when ben speaks and gold pops a boner. odd.
Keep increasing the global marginal tax rate! Go Bernan!
This morning i said -1,5 % on the S&P, now i say -1,2lol
The Fed report will have a couple of hours (1/2 life) , then I'll short the hell out of it! This doesn't even qualify as a tape bomb.
Gas and food costs will go balistic, if the Fed. prints more. Steve Liesman needs to get a bungalow with Mario Draghi, so they can sit around the fire and pump each other up...
Try 20-30 minutes (1/2 life)
Scientific method for measuring FOMC jawboning half-life:
The time it takes Steve LIESman to ingest 2 quarts of Ben & Jerry's Chunky Monkey.
STUPID action in FX....I mean...crazy YenCross.....what's your take on it?
Gold didn't react as if a major infux of cash was a couple weeks away. I'll continue to load up regardless.
Alex, I'll take "things I wish I didn't say just before bailing out JPM from a bad trade for 280 billion dollars".
12 minute half life?
No QE3,4,5,6,7,8??
But, I've already priced it in to my Netflix movie queue!!
The game is up. An increase in food stuffs and energy would absolutely crush the world at these levels. There will be no more easing until 2013 and the market will adjust to headlines like "Japan's EU exports down 25% YoY". A move lower in global growth is coming.
this must have caused the 14:00 rally. we see all too aoften w=b een wondering what it was abot, ande the nearest I can figure is they stay within the hourly bollenger bands. but that would not be time dependent. Not sure why the volume surge at 14:00 isn't a matter to be investigated, but heck, who knows
This explains the front-running pop in silver the last 3 days.
yaaawwn... translation .. well steal more from grannie to give to our criminal buddies if we need. many more favored.. Translation. many more got thier bribe check..... there not gonna do it!! MOMMY MAKE THIS STOP!!
They are discussing it, but they will not push for it until they crash the market and people are begging for it. Right now, the S&P is at a double top. They have to crash it so sheeples will beg Benny for more printing.
If at first you don't succeed, try, try again.
Hopium in all it's glory:(
When is everybody going to understand that the current Fed members are just ORDER TAKERS from Congress and WH?
Can't you see that QE1 and QE2 happened when the Dems had House, Senate and WH? Can't anybody notice that since the Republicans won the house, nothing happened?
There's no power in the Fed any longer. They are just advisors, that's it.
For any move the Rep House and the Dem WH must agree. If no agreement, nothing happens. PERIOD
Looks like the euphoria has already worn off.
That had a half-life of what?...15 minutes? if that...
time to construct the next rumor before the 4pm bell.
The next rumor is Greece leaving the EURO next month.
no more qe. the data the next few months will be better than expected.
considering everybody expects the data to suck, better than expected should be fairly easy to manipulate...errr...I mean...accomplish.
yup. looks like the message today that qe is coming successfully propped up the market. mission accomplished.
Biggest move = OIL.
The Fed's inflations expectations ignores all the astronomic price rises in softs. Amazing.
+10. Crazy ignorant.
Off topic, what what's the story with the sharp gold pop that just occurred?
tinky it's not off topic. the fed just said qe is coming. next months better than expected nfp will change that though.
Thanks. I obviously wasn't paying attention.
Stocks pare losses on pent up housing demand for more QE by aliens.
we are officialy in the ninth inning. keep stimulus efforts alive without actually doing anything. The reality is there cannot be QE ,simply by virtue of agricultural products alone. Recall the rice crisis and global food revolutions that boxed the fed last round, are very much still a factor, given the drought we are confronting. The fed is in a box
Hurry up and get your EURO's, just in front of Drahgi's supply:)
the Committee decid-ed that the statement should conclude by indicating that it will provide additional accommodation as need-ed to promote a stronger economic recovery and sus-tained improvement in labor market conditions in a context of price stability.
The Committee also decided to endorse God, apple pie, and motherhood.
Any easing will not be until after elections. Lots can happen between then and now.
The Bernanke effect: USD off the cliff, Oil soaring.
Thanks dickhead!!!!!
So we've had our 15 minute wobble that over ran the bots. Now volume has dropped to zero and the bots have the stocks exactly where they were at 1:59.
What's the problem....luuuuuuv the bots.
please please robin hood. I refuse to call it stimulus. I call it the raping and pillaging of granny. its anything but stimulus to anyone other than wall street. if they just called it "we fuck you over one more time" i can live with the honesty
What was that good for......20 Dow points? LMAO.
as tyler and others have mentioned, Fed has apparently decided on it's own to add a 3rd mandate, as if they were doing so well with the 2 they have, targeting the level of the Russell 2000.
So, I guess instead of capital allocation being determined via market forces and the strengths and weaknesses of products, services, ideas etc., it is better left to Ben Bernanke and the folks at Russell investments to determine where capital should be allocated in America.
If you didn't buy the dip before the minutes, there may still be time. Just do it.
S&P 500 and gold rallied, 10 yr Treasury yields stumbles.
http://confoundedinterest.wordpress.com/2012/08/22/feds-fomc-minutes-no-surprises-sp-500-and-gold-rises-10-yr-treasury-yield-falls/
The YEN!
If you didn't buy the dip before the minutes, there may still be time. Just do it.
Why is Bernanke doing QE bad for the USD but Drahgi doing QE good for the EURO? Supply/Demand, don't need no stinking Supply/Demand:)
Massive euro rally. Can the Fed save the euro? All of a sudden, Greece, Spain and Italy are far more wealthier ... Europeans love Bernanke. He bails out European banks and make everything cheaper there too.
Positioning. Specs very short EUR and very long USD.
I guess Bernanke doesn't see that the S&P is up 14%, twice the long term average this year already and that oil is pushing $100. He needs to raise the prices of everything some more to help us all.
It's print to infinity,printathon, trash the US dollar. The US dollar gonna be devalued another 50%.
Bernanke = Draghi. Same script.
We'll do whatever it takes to preserve the dollar. And believe me, it will be enough...
You mean "crush the dollar".
USD 50% lower then the US can start selling the Chinese stuff they don't need on credit! Of course no one will be taking any foreign holidays but people will have jobs.
New York taxi driver mentions QE3 and the Dow moves up sharply
The FED is already leveraged 60-1 against its own capital and therefore can´t really do jackshift as has been evidenced in its latest shuffling around of its portfolio from short to long. There is a huge pump ongoing and the dump after Jackson Hole will be severe.
The FOMC has telegraphed its next move, but the market did not read the minutes carefully yet. The market will read this carefully over the next hours and days.
Many members want "monetary accomodation" soon and only one dissented:
Extending promise to keep interest rates low was the most agreeable:
Anything beyond that raised the objections of more than one member:
And these minutes were from before all the risk-on assets rallied in August, housing was up, and the food inflation rocket became more evident. Thus the FOMC has less justification to act now, than then.
Thus the most accomodation we will get on Sept 13, is an extension of jawboning about interest rates. The market will then realize the global contraction will get no injection of money until at least after the elections. Risk-on assets should sell off when the market makes this realization. Even if this selloff begins before Sept. 13, then next FOMC meeting can not go further than lengthening guidance, unless the selloff is severe enough. So in either case, it is time to move to a short position.
As I expected, the NY Times explains the FOMC minutes do not support a QE3 by Sept 13:
http://finance.yahoo.com/news/fed-members-saw-action-unless-182202172.html
http://finance.yahoo.com/news/ben-bernankes-jackson-hole-speech-09150056...
http://www.marketwatch.com/story/fed-minutes-show-active-discussion-of-q...
More detailed analysis:
http://economistsview.typepad.com/timduy/2012/08/chances-of-qe3-diminish...
Key point is that a swing member changed his stance since last meeting:
http://www.bloomberg.com/news/2012-08-22/many-on-fomc-favored-easing-soo...
They keep prattling about "recovery." It has been 4 years without real evidence of "recovery." Can these people be any more GLIB?
There's been a recovery for everyone!
That matters.
the fed cant run out of bullets unitl hyperinflation =(
the fed cant run out of bullets unitl hyperinflation =(
BERNANKE IS THE KING AND MARIO IS THE QUEEN. HENCE BEN WILL NOT MOVE UNTIL MARIO MOVE FIRST...SELL OFF ON ITS WAY THEN EURO DOWN AND USD UP FOLLOWED BY EURO UP AND DOLLAR DOWN...TO END IN NOVEMBER
The Fed are out of control.
China WILL NOT let this oil price rally over 100.
Get ready for rare (factual) bad data out of China
I'm impressed. Totally correct looking at the just released data.
Though China does buy oil at $115, Brent.