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Real Time Insight

While the press release is ongoing at the time of writing, we do know that Bernanke and company made  no changes to rates and reaffirmed their continuing plan to keep short-term interest rates near zero through late 2014. 

The FED did take a slightly different, perhaps more cautious tone on their assessment of the economy.  They cited new concerns about financial strains overseas and further cautioned the public on the weakening employment data here in the U.S.   In fact, when questioned, the Chairman expressed what seemed like elevated concern on European issues and noted that they could have substantial ramifications here in the U.S.

It still felt that even though “concerns” were noted, the press conference seemed like business as usual at, which means many words were exchanged, but not much was actually said. 

Mr. Bernanke’s quote of the afternoon was that we should all “Stay tuned for more transparency into the FEDs actions.”   I won’t hold my breath for that.

I did find it at least somewhat reassuring that they have increased the top end of inflation expectations and now expect inflation to stay below 2% for several years.  The Chairman did qualify the elevated inflation readings with the word “transitory” again…

Many traders were hoping we should get some indication that further easing was on the way.  In so many words, the chairman did say that the FED was vigilant and prepared to move quickly if needed “All our tools are on the table and we will not hesitate to use them.”

The central bank has held short-term rates near zero since December 2008 in an effort to spark growth and on the surface it seems that will continue for some time. 

But it's interesting to note was that at least 6 FOMC members see tightening in 2012 or 2013 and the majority of members see the FED FUNDS rate between 1% and 2% by 2014.

So my question to all of you is which will come first, easing or tightening?  The markets seem to think the former…

 

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