FOMC Massively Gooses Gov't. Balance Sheet

The FOMC has come in with no rate change as we had expected.  When it is already at a near-zero rate policy, there was no other outcome.  The Fed Funds Target Rate was left at 0.00% to 0.25%, and the discount rate was left at 0.50%.  But where this gets interesting is the amount that the Federal Reserve is increasing the balance sheet via massive securities purchases.  Ben Bernanke is about to inject a massive amount of additional cash into the system.

The Fed will buy an additional $750 billion worth of agency mortgage backed securities.  It will also purchase an additional $100 billion in agency debt instruments, and it will purchase an additional $300 billion worth of long-term Treasury securities over next 6-months.

The FOMC has also pledged to keep Fed Funds at exceptionally low levels for quite some time.  It said that the economy continues to contract and the near-term is weak.  The Fed also sees a gradual resumption of sustainable economic growth and inflation should be subdued.

The magnitude here is that the mortgage backed security purchases are now more than doubled.   Equities have launched as a result with the DJIA up 120 points to over 7,500 and the S&P 500 now up 37+ to 1499.  Treasury yields in 10-year and 3-year notes have tanked as bond prices have gone up.  The dollar has also tanked, and gold is up higher as a result.

The inflation mongers will be out in full force by tomorrow morning.

JON C. OGG