The FOMC, as expected, has left the Fed Funds rate unchanged in another 10 to 1 vote.  More important is the FOMC’s outlook on the economy, inflation, and on quantitative easing progress.  Ben Bernanke and friends did issue a slight economic upgrade today as they noted that information shows further recovery since meeting in November.

Growth is still to anemic to drive employment and household spending has risen moderately.  The FOMC noted that businesses remain reluctant to hire.

Spending was described as “constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.

The capital side is seeing spending increase from business in equipment and software while non-residential structure investing remains weak. Housing is also staying depressed.

On inflation, Bernanke and friends noted long-term trends remain stable but noted that the measures of underlying inflation have continued downward.

The FOMC did note its dual mandate of price stability and maximum employment.

On securities buying via QE2, the FOMC “decided today to continue expanding its holdings of securities as announced in November” and said that it plans to maintain the current policy of reinvesting principal payments from its securities holdings.

The FOMC further noted that it plans some $600 billion of longer-term Treasury purchases by the end of Q2-2011 and noted that it “will adjust the program as needed to best foster maximum employment and price stability.”

Also noted was that the FOMC will keep its target rate at 0.00% to 0.25% and maintained the stance that “exceptionally low levels for an extended period.”

Thomas M. Hoenig remains the sole NO vote on rates and easing.

JON C. OGG

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