There’s always something to howl about.
In keeping with my practice of translating the Fed’s statements, here goes this one:
“Move along, keep moving, nothing to see here folks! Business as usual!”
They didn’t do a thing to address the bond market concerns or to allow that things are changing at all. Expect mortgage rates to drift up a small amount on the lack of news…..
Tom Vanderwell
Yep, it’s that time again. The Fed met yesterday and today and came out with their announcement this afternoon at 2:15 pm. I promise that this one won’t be as long as the last Fed Translated was.
As usual, my comments are in bold and italics…..
April 29, 2009
For Immediate Release:
Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. The downhill slope is less steep than it was. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. We aren’t going to see a substantial turn around in the economy soon. A weak, ambivalent turn around, probably, but not a strong return to growth. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability. What else could they say but to say that they anticipate that what they are doing will eventually work? Would the markets be happy if they said, “We don’t have a clue whether what we’re doing is going to work?” Nope.
In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. They don’t say for how long, but I’m going to say that I think we’ve got 12 to 18 months until we start seeing a rapid spike in inflation and a rapid jump in interest rates. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term. Let’s look at that for a minute. They think that inflation would Read more
Tom here…. Sorry for the delay, but better late than never….. (my comments are in bold)
The Federal Open Market Committee decided today to keep its target range for the federal funds rate at 0 to 1/4 percent. Nothing new there and no surprises. Can’t go lower than zero and certainly can’t raise them right now. The Committee continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. Here again, no big surprises. I think the surprise is going to be the amount that rates go up once the economy does recover and inflation becomes an issue. I’ve been talking to a large number of people who want to use a home equity line (at prime or prime minus .5%) to pay off their mortgage. They would lower their rate down to around 3%, but my recommendation would be to do that only if they can plan on paying the balance off within 1 to 3 years. My feeling is that any longer term than that will make it too expensive because of the way rates are going to jump up. For more thoughts on that, see what I wrote a couple of weeks ago about the “W” recovery.
Information received since the Committee met in December suggests that the economy has weakened further. No surprise there. Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly. Conditions in some financial markets have improved, Really? Which ones? in part reflecting government efforts to provide liquidity and strengthen financial institutions; If you look at Bank of America and Citi, you can’t tell that the financial institutions are stronger, nevertheless, credit conditions for households and firms remain extremely tight. The Committee anticipates that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant. Translated – we hope things get better later this year, but we really don’t know, so don’t blame us if it takes longer.
In light Read more
