The announcement from the FOMC on the decision on interest rates is out. As most suspected, it was not the rate decision that mattered as much. It was the language around the potential exit strategy and the outlook on both the economy and on inflation. Lastly, there was the discussion on purchases of assets and securities.
As expected, the rate was kept at 0.00% to 0.25% and the Fed is saying that it continued to believe that the need to keep rates low will be present for some time. The group noted that the economy is leveling out but will remain weak for some time. The FOMC did note higher commodity prices but said that it believes inflation will be subdued for some time. The FOMC did say that there is no change to the $1.45 trillion in mortgages and securities being repurchased, but said it anticipates slowing the pace of buying Treasuries and that it would complete that program by the end of October.
On July 15, we noted how the Fed’s minutes from the June FOMC meeting hinted at an exit strategy to the free money for the banks and depository institutions. We also noted how the FOMC has noted at least some inflationary concerns and that the expectations was for an improving or less-bad economy than previously forecast.
But today and yesterday we had Fed Fund Futures indicating less than a 40% chance of any change to the 0.00% to 0.25% targeted Fed Funds Rate. In fact, if we adjust that figure with a bit of time bias, we would say that the chance of any formal rate change was less than 25%.
FULL FOMC Statement here….
JON C. OGG
AUGUST 12, 2009
Top Gaining Stocks
Top Losing Stocks