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Previewing Today's Economic Events And FOMC Announcement
This is how Goldman sees today's events, and critical FOMC announcement, public communication overhaul and press release, unfolding.
10:00: Pending home sales (December): Small decline? The pending home sales index – which tracks signed home sales contracts, and leads the official count of existing home sales by 1-2 months – rose sharply over the last two months. The consensus expects a small setback (-1%) in this month’s report. Mortgage purchase application volumes have also remained very weak, suggesting that home sales are not yet taking off.
Consensus: -1.0%; Last +7.3%. MAP: 2
10:00: FHFA House Price Index (November): This index—which tracks the purchase price of homes with agency-conforming mortgages—has been mixed over the last few months. Since Q1 2011, the level of the index has been about unchanged.
Consensus: Flat; Last -0.2%.
12:30: FOMC rate decision and statement. The FOMC will release its standard statement at 12:30 today. We don't expect significant changes in either the growth or inflation paragraphs of the statement. Although the data have been generally stronger than expected, the basic message of “moderate expansion" still looks appropriate.
However, we expect the committee to eliminate the "mid-2013" phrase. The whole point of the SEP funds rate projections is that they are a better avenue for providing guidance on future policy than the statement, not that the Fed needs an additional avenue for such guidance. In our view, it would be quite problematic to have the SEP projections and the FOMC rate guidance co-exist, as many market participants seem to be expecting. If they are consistent with one another, nothing is gained by retaining both types of guidance. And if they are inconsistent, this could cause great confusion. In an effort to avoid misunderstanding, the committee could leave the 2013 language in the statement one last time, and then explain that it will disappear in the future.
The FOMC might also release a statement about its longer-term monetary policy goals and strategy. This would probably involve an explicit—but flexible—inflation target formulated as a headline PCE inflation rate of 2% over the medium term, but with room for significant deviations in the shorter term. It is clear that some type of statement is in the works. However, we do not know whether it will be released today or at a subsequent meeting.
14:00: Forecasts released. At 2pm the committee will release its expanded forecasts, including projections for GDP growth, unemployment, and inflation, and now also the federal funds rate. The key point is that while we expect the fed funds rate projections to range quite widely, we think that the median participant will project a funds rate of just 0.75% by the end of 2014. This would imply that the median participant expects the first rate hike in 2014. Please see the links below for more details.
Press reports indicate that a forecast “narrative”, including qualitative guidance about how the balance sheet is likely to evolve, will not be published today. Instead, it will be included in the minutes from today’s meeting released on February 15.
14:15: Fed Chairman Bernanke press conference. Chairman Bernanke will have plenty to explain at his afternoon press conference. We think the focus will be on the interpretation of the funds rate projections, the inflation target (if one is released), and what the committee might say about the balance sheet in three week’s time.
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What? No QE3 announcement under a "mission accomplished" banner?
As long as the stats and job numbers are improving. Or we are told they are getting better. NO QE3. The possibility and talk, and speculation of QE3 are a more powerful tool then QE3 itself. It's the greatest safety net for falling stock markets and rising usa treasury bond yields.
How can one trade or make money in these markets? I guess being long is a safer choice then fighting the forces of good and evil. Precious metals and shorting japan bonds and usa bonds seem to be a decent long term bet. If it's good enough for kyle bass its good enough for me. Anyone think the USA bonds will ever hit negative yields when the euro implodes and everyone runs to the safety..lol of the us bond?
Isn't it amazing how a piece of paper and a "promise" from the US government is more of a safe haven than a piece of physical gold or silver? After all, isn't the term "The gold standard" for a reason?
If you have a billion in fiat and need an investment to repo, hypothecate, rehypothecate etc., would you choose an investment that has a history of sharp drops in value during the times when you would need in most? The manipulation of the PM markets may be doomed longterm because they can't stop the inevitable but they have effectively destroyed much of gold's and particularly silver's value as an institutional reserve asset. But don't worry, they lose in the end and you have much less competition when you want to buy some now.
Nah, still waiting for further B.I.S. instructions.
QE3 will not be arriving anytime soon.
If they were to do so when data has been relatively good, can you imagine how the market would react? Ie, what would they be willing to do if we saw a downturn again?
Look how insane its become, they now say QE must happen because a downturn in stocks MAY happen?
Well said Sheepdog.
I guess they figure it worked with WMD's...
I agree. The HFTs have been "front-running" QE3 since QE2 ended. The S&P downgrade of US debt threw a curveball into there, but since then, every "weakness" has been bought. Volume has continued to plummet (as repeatedly reported by ZH) and Europe has been completely ignored as HFTs and Wall Street pundits continue to believe the idiotic politicians in Europe and that the can will be kicked further.
The ONE problem with ZH is that they (and we) are looking into the [distant] future (in HFT terms). We know how this fucker is going to burn and yet, Wall Street continues to baffle us with its utter stupidity. TPTB will continue to stall as much as possible but the house of cards will inevitably fall. We have been waiting for a while now for Europe to implode and for the market to correct (as it should) prior to any further easing. I think the fuse is burning near its end and all of ZH's (and others here) predictions will soon be proven correct (as they are daily - just see PIMCO/Reuters yesterday).
QE3 cannot and WILL not come with the S&P above 1300. It'd paint Bernanke as the villain instead of the hero and would be negative IMO for Obuma's reelection. The way I see it, at some point the word "default" will begin to be used much more by the MSM. Once that happens panic will begin to set in and the ECB will almost surely resort to further expanding its ballooning balance sheet giving Bernanke precisely what he needs for QE3...A strong dollar and panic in the financial markets.
All of this QE front-running simply means that absolutely NOTHING negative is priced in.
I'd like to ask Mr. Bernanke if he would personally invest in long term treasuries or if he would advise his spouse to do so.
I'd wager ol' Ben has a few gold bars in a lock box under the floor boards...
It's tradition.
He better transfer them or break them down while he is physically fit before becoming too old to lift them.
IMO, whatever it takes to get Obama in for a second term - thats what they will do.
Why? Really, whats the big deal about going all out, whatever it takes, to get the guy with the lowest approval rating in history 'in there' again? Actually, another fresh puppet would make far more sense. This clown is hated...so what does he buy them? I dont get it.
because if Ben doesnt get his buddy Obama re-elected he could be out of a job. With Mitt and Twit leading the republican nomination nothing will change regardless. It would be really nice if Ron Paul can make a comeback and win the nomination. If not Americans will get the President they deserve. You guys had a great candidate and let him go to waste for 30 years.
If no Bailout which our Podium Thumper cried last night means commodites and metals up and paper down.
Pretty sad isnt it? 'No new bailouts' means 'bad news' now....just pathetic.
Bernanke will not QE4 until the Dow is back down near 10,000. Why QE4? Because the dollar swaps arranged with the ECB is effectively a back door QE3 and already operating.
DavidC