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  • FOMC Meeting Response

    The Federal Reserve decided yesterday to leave the federal funds target rate unchanged at 0-0.25%, citing the slowness of the economy's growth and stable longer term inflation expectations . The Fed will also sell some short term Treasuries, and in return buy some longer term Treasuries. While there were calls for more action from the Fed, Tim Duy called the Fed' stance "bold." Bottom Line: I think Fed official believe they are being bold; I see them as continuing to ease policy in 25bp increments. Expect that to continue. Assuming the economy fails to regain momentum, the Fed will follow up with additional action – QE3 will be the next stop. Ignore the dissents; they are background noise. Don’t expect miracles; expect small moves, the equivalent of 15bp here, 25bp there. The real leverage could potentially come from fiscal policy leveraging the easy monetary policy. Print the money and spend it. Open up the refinancing channel. Overall, make the objective of national economic policy simply be to decisively move us off the zero bound. Not deficits, not the dual mandate, just commit to pulling us off the bottom. Read Duy's Fed Watch response to the FOMC meeting here . For more analysis of the announcement and possible response today on Wall Street and in Washington, here's the Wall Street Journal's Evan Newmark , Jon Hilsenrath , and Thorold Barker :

  • The Fed and the (Near?) Future of Interest Rates

    Yesterday the Federal Reserve's Board of Governors decided in their last policy meeting of the year to keep the target range for federal funds--aka, the benchmark interest rate--between 0 and 1/4 percent. Their reasoning, at least publicly, appears to be based on both good news and bad news. The good news: things are picking up (so Fed action, their reasoning seems to be, has been the right action). The bad news: things aren't picking up very fast (so we need more of the same Fed action). From the Fed Board of Governors' release: Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement over recent months. Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls; they continue to make progress in bringing inventory stocks into better alignment with sales. Financial market conditions have become more supportive of economic growth. 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 contribute to 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. Read the Fed's full release here . Not much of a surprise in the Fed's decision, but how long before interest rates start to climb? Dennis Berman , the Wall Street Journal's money and investing editor, and Dave Callaway , editor-in-chief at MarketWatch , weigh in on the Fed's statement yesterday and the near future of interest rates at the Journal's News Hub:

  • WSJ March Forecast: Failing Grades and Little Optimism

    Economists polled in the March Wall Street Journal Forecasting Survey "see a nearly one-in-six chance that the US will fall into a depression." And they have pushed back their projection of when the current recession will end. In last month's survey, the magic month was August, now it is October, and only 13% of economists project the end to come before the third quarter of 2009: The forecast also shows unemployment climbing through the rest of 2009, with economists predicting another 2.8 million jobs lost. Overall, the 49 economists surveyed for the forecast are not happy with the Obama Administration. 42% of respondents gave President Obama grades below 60 on a 0-100 scale. Treasury Secretary Geithner scored a 51 average. The Journal's Phil Izzo and Kelly Evans share the grades in this video: You can access all of the March Forecast's data in useful multimedia charts here .