FOMC Keeps “Extended Period” But Omits “Transitory”

Ben Bernanke and the FOMC have voted unanimously to keep effective Fed Funds rates at an effective target of 0.00% to 0.25%  and the discount rate at 0.75%.  What investors need to care about most was that the “extended period of time” phrase was maintained.

In his press conference, Bernanke argued that the economic recovery was happening at a slower-than-expected pace and left the door open to additional stimulus measures if conditions call for them.   Higher food and energy costs and supply chain interruptions continue to depress what little gains the economy is making.

These comments are hardly a shock.  It is not as if the FOMC is that interested in creating more problems for Europe.  Imagine how European markets would react if Bernanke signaled that a rate policy change was being considered.  We are all connected more than we’d like to think.

For now, the maturing payments received in Uncle Sam’s massive portfolio will be reinvested into Treasury securities.  That is another method to avoid what would be considered an indirect tightening measure.

Inflation is still considered transitory… ” Inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions.  However, longer-term inflation expectations have remained stable.”

The rest of the FOMC notes can be seen here.

JON C. OGG