The Federal Open Market Committee begins its August meeting this morning and the official announcement should come within a few minutes of 2:15 PM EST.  The market is looking for more help, via quantitative easing or stimulus measures despite the fact that interest rates are about as low as they can go.  Ben Bernanke has already telegraphed some economic easing measures via the pledge to keep extremely low interest rates for an ‘extended period,’ lowering the rate on banks’ reserve deposits, and by sustaining or expanding the size of the balance sheet (buying securities).

It was just last month that the path to adding liquidity was noted as possibilities, but the FOMC was in no position to take immediate action.  That was the impression we had at any rate.

Bernanke also spooked the markets initially when he noted “the economic outlook remains unusually uncertain.”

Today’s meeting is likely one of a symbolic statement than a statement with an exact path.  Outside of the jobs front, the growth is slower but it is still growth.  The Fed’s dual mandate of growth and employment makes the situation a bit of a conundrum.

One likely move today in the statement is that the FOMC may confirm that it will reinvest its proceeds from the mortgage bond holdings by buying new securities.  More adjustments to mortgages is the decision of others, although getting the mortgage rates as low as possible is dependent upon low interest rates and tight spreads.

The target rate on Fed Funds is 0.00% to 0.25%, the same it has been since the end of 2008.

JON C. OGG

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