No surprises in the Federal Reserve’s decision on Wednesday to keep interest rates at 0.25 per cent, but you will want to peruse the statement, which is here.
Snaps:
– Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period
– Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
– In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010.
Krishna Guha over at the FT’s Money Supply blog detects a change in Fed rhetoric here – albeit a subtle one:
The shift was to identify the factors on the basis of which it expects to keep rates on hold near zero for a period of at least six months – the understood meaning of the “extended period” phrase.
Implicitly the statement also indicates that if these conditions are not met the Fed may have to raise rates within the six month period. So it is a form of what I called in my post this morning a conditional qualifier ie making it clear that the signal on the future path of rates is conditional on the forecast playing out in the expected manner.
Related links:
How the statement changed – WSJ Real Time Economics