Courtesy of The Pragmatic Capitalist
FOMC POLICY STATEMENT
It looks like no material changes to the statement. The Fed is continuing their ridiculously predictable dollar destructive/ asset bubble policy. As we suspected, the dollar is getting crushed, bonds are tanking, stocks are soaring and gold is higher. I would be a seller of this priced-in news.
Release Date: November 4, 2009
For immediate release
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. 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.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. 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. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
MARKET WRAP – SELLING THE NEWS
As we expected, stocks cratered this afternoon as investors look beyond the Fed news to the jobless report on Friday. Investors are paring back risk in case the jobs report disappoints once again. The job market remains one of the primary concerns about the recovery. The S&P 500 finished the day roughly flat. Banks finished down 1.5% and the S&P erased a full 1.5% rally.
U.S. Economy
The Federal Reserve concluded its two-day meeting and kept the federal funds rate unchanged at .125%, as expected. They acknowledged that “economy has continued to pick up,” but continue “to anticipate that economic conditions… are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” The December 2010 eurodollars were up .03 at 98.44.
The Institute of Supply Management’s index of services slipped from 50.9 to 50.6 in October, weaker than expected, but still a sign of expansion.
The Mortgage Bankers Association said that its index of mortgage applications was up 8% last week, helped by a 30-year fixed mortgage rate of 4.97%.
ADP Employer Services said that 203,000 private sector jobs were lost in October, down from a loss of 227,000 jobs in September. The U.S. Labor Department will release its next unemployment report on Friday morning.
