The FOMC leaves rates unchanged today as most investors expected. Couple of things to note include current levels of inflation and the continued weakness of the credit markets. In short, the Fed could not do anything without shattering one thing or another. Here’s a link to the release.
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting
FOMC leaves federal funds rate unchanged this afternoon. Here’s a copy of their statement. I’m not in a good mood so don’t expect anything until I cool off. Sorry.
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This week should promise to be full of excitement as the FOMC meets Tuesday and Wednesday to decide the fate of the U.S. economy. Well perhaps not the fate, but they will decide on new interest rate policy. At this point, any further rate cuts will probably signal financial suicide, so expect the FOMC not to cut rates. However, some analysts in the financial world are figuring a rate increase from the Fed this week in order to battle inflation and to make an attempt in strengthening the dollar against the rest of the world. Futures this week are showing rates will remain stable at 2.00%. A rate increase at this point would be more symbolic than helpful as it would signal that the inflationary pressures the U.S. has been experiencing are indeed real and a priority. As most of you know, it’s gotten a bit expensive to eat and drive into work. Expect a stronger inflationary statement from the FOMC this week.
On Tuesday, we have consumer confidence at 10:00 am EST. Wednesday brings Durable Goods (8:30 EST), New Home Sales (10:00 EST), and the FOMC announcement (02:15 EST). Thursday’s a fairly important economic day with last quarter’s GDP and Jobless Claims (08:30 am EST), as well as Existing Home Sales (10:00 am EST). And rounding out the week on Friday is Consumer Sentiment at 10:00 am EST. Details can be found here.
Futures were up over 50 points last night but are currently up about 10 points. I’m looking for some sort of a dead cat bounce, but at this rate, I don’t know if it’ll happen. We’ll see!
The FOMC this afternoon cut the Federal Funds Rate and the Discount Rate by 25 basis points to 2.00% The following is the text of the FOMC announcement.
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The FOMC met yesterday and this morning regarding the state of the economy. The markets are currently pricing in an 80% chance of a 25 basis point cut. So far, the markets are up about 100 points prior to the announcement in approximately 60 minutes. Personally, I hope the Fed decides to hold firm and leave that bullet in its chamber. The markets need time to work through the 300 basis points the FOMC has cut over the past 6-7 months. It takes the economy approximately 6 months to feel the full effects of a rate cut (at least, that’s what I remember from basic macroeconomics). With GDP holding steady at +0.6%, I think the fears of recession are on their way out the door. Stay tuned for the announcement!
