The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.
Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.
Translation: Inflation is too high; it hasn't come down as expected. We're still expecting a slowing economy to lower inflation.
We're not lowering rates anytime soon.
9 comments:
and the stock market loved it.
I don't get it. This was entirely expected. Why is the market going nuts?
could be technical. They took out the 141.42 resistence level and are doing it on pretty good volume.
could be fundamental, the economy is nearly a bleak as you might think readiing blogs like this.
I have no idea why the markets spiked on this news. I think the Fed has been entirely consistent in their stance. They have consistently said inflation is too high.
They made a change in part of the statement where they no longer referred to future tightening.
not that I'm saying the stock market move is justified, that's just what the bulls are keying off of.
problem in the credit market isn't that interest rates are too high, it's that standards were too soft.
Huh... the stock market is going crazy?? Thanks for your comment above Bonddad, I thought I had missed something.
JWC
redfish's first comment is the most spot on.
The Fed's statement went from options of further tightening, or standing pat, to: further tightening, standing pat, or loosening.
Wall Street has been betting on the Fed riding to their rescue (again) and today's Fed statement tells them they are betting correctly.
This is a market that wants to be bullish. Bad news means Fed cut, therefore rally. Good news means growing economy, therefore rally.
Does this mean that, when oil prices begin their inexorable upward climb in the next quarter and food prices start their "pig through the python" magic on the rest of the economy, the market will again recognize reality? Or, is it too much fun stealing money from the hoi poloi to stop lying? The Fed is still trapped in a box.
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