FOMC Decision: No Changes
No big surprises here. The Fed didn’t do anything substantial. As I mentioned previously, the prudent move was to sit tight and wait for more data to come in. Here’s the full release:
Release Date: August 1, 2012
For immediate release
Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year. Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant an exceptionally low level of the federal funds rate.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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12 Comments
Nice call here Cullen. Not that I am rooting against you, but I’d love to see you be fantastically wrong some time! It would be a nice change of pace.
I get plenty wrong. You’ve been around long enough to know that!
Insights from TPC on fed mettings are great, if you get it right or not, just keep telling your readers it’s not a trade recomendation!
One of the biggest problems the FOMC has is that to a large extent they’ve “done their job” with regard to propping up the economy. They need their partners over in the Congress to do their part.
Gotta think they’ll have trouble acting at the September meeting as well…for fear of looking political with the election around the corner….
I strongly agree. Bernanke just doesn’t seem like a guy who want to rock the boat a few weeks before the election, at least not with anything meaningful. With no more QE, the fiscal cliff nearing and economic data weakening I think we could be in for a rough fall again.
I think Bernanke has been forced to abandon a lot of his previous ideas about the efficacy of monetary policy, and understands there just isn’t much the Fed can do. It also appears the Obama Administration has issued orders to blame the Fed for our current situation so as to avoid responsibility.
Oh yeah … it’s all the Fed’s fault, or Obama’s fault. Actually, they all know exactly what to do to get the economy roaring again; they’re just not doing it because they don’t like America and don’t care about their own jobs. Oh yeah …
I haven’t blamed anyone, so I’m really not sure what your point is. Maybe you should slow down.
Fed: “No changes”
Market: “OMG SELL OFF .5% IMMEDIATELY”
(10 minutes elapse)
Market: “oh, right, nothing changes… buy it all back up…”
The term ‘stranger than fiction’ comes to mind.
so whats your take on the ECB meeting?
)
(BTW I went to the http://www.ecb.int to look at their meeting schedule and noticed that they had the Oct meeting press conference listed before the meeting itself! Maybe their ‘austerity before recovery’ mindset at work again
The other factor at play here is that they’re probably fearful of shooting their bolt too soon. If we get a euro-quake prompted by Greece or Spain the next few months, they’re gonna need to fire every bazooka in their armory.