Photo: The Federal Reserve
THE FED STATEMENT IS OUT:Very meaty announcement out here.
Here are the four key ideas.
- There will be no rate hikes until mid-2013.
- The Fed says downside risks to the economy have grown.
- The Fed is prepared to use additional tools if warranted.
- Three Fed members — Kocherklakota, Fisher, and Plosser — have dissented from the FOMC decision.
As for the market, it’s been pretty choppy; down, then up, and now stocks are plunging.
This is just ridiculous. Markets bouncing all over the place. Now the NASDAQ is up 1.4%.
Here’s the full announcement:
Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labour market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity. Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 per cent. The Committee 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 mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.
Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.
Update: We’ve never seen this. The Fed is late. Should be any moment.
Original post: LET’S. DO. THIS.
Sometime between 2:00 PM ET and 2:15 PM ET, the Fed will release its latest decision on interest rates.
There’s virtually no chance for any change in actual rates, but with markets plunging in coordinated fashion all around the world, and the economy looking quite creaky, there are high hopes for some kind of intervention, or expansion of the Fed’s quantitative easing
Full-blown QE3 is not expected today, but the market is certainly hoping for some kind of reassurance that the Fed is there, especially since there’s nobody left (Washington is deadlocked and the European leadership is a mess).
Markets are quite higher on the day, though have come off earlier highs.
The S&P is up about 2%, and the dollar is getting smashed, especially against everyone’s favourite, the Swiss Franc.
Refresh here for LIVE coverage of the rate decision and its aftermath.