Showing posts with label FOMC Statement. Show all posts
Showing posts with label FOMC Statement. Show all posts

As Expected, The Fed Doesn't Taper (When Will They Taper?) - FOMC Statement

The Fed didn't taper, which was 100% expected. On my TradingView watchlist stocks don't seem to care: $SPY is down 0.64%, $IYT is down 0.69%, and $IWM is down 1.37%. So when will the Fed taper? Vote in the poll on the sidebar. It probably won't even matter by then. (*Get more info at Business Insider: What Wall Street Economists Are Saying About The Fed's Surprise.)

The Fed Didn't Taper, Maybe Next Time! (FOMC Statement and Press Conference)

The Fed decided not to reduce QE (asset purchases) at today's FOMC meeting. Watch Fed Chairman Ben Bernanke's press conference below. $SPY is currently up 0.87%.

Release Date: September 18, 2013

For immediate release
Information received since the Federal Open Market Committee met in July suggests that economic activity has been expanding at a moderate pace. Some indicators of labor market conditions have shown further improvement in recent months, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen further and fiscal policy is restraining economic growth. Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.

Bernanke: "It Would Be Appropriate to Moderate the Monthly Pace of Purchases Later This Year"; S&P and Shanghai Composite Updates

The FOMC didn't decide to slow down its Treasury bond and agency MBS purchases (QE) at its meeting last week, but Fed Chairman Ben Bernanke did warn at his press conference that the Fed might "moderate the monthly pace of purchases later this year." As a result, the stock market sold off, which, if you think about it, was already predicted on CNBC a month ago, in the Fed's minutes release on May 22, and in all of Jon Hilsenrath's WSJ articles. Also, since deflationary forces are still in the economy, it was expected that the Fed wouldn't taper off QE at this meeting. According to Bloomberg, "Federal Reserve Bank of St. Louis President James Bullard said the central bank may need to increase monthly asset purchases above the current $85 billion pace if inflation slows further below its 2 percent goal." So you can see that the market really has no clue what it is pricing in on a daily, weekly or even a monthly basis. You could also say that China's interbank lending freeze and the IMF's warning about Greek aid was also part of the downside catalyst.

Fed Announces QE4+, Will Raise Rates When Unemployment Rate Hits 6.5% Or Inflation Rate Hits 2.5% ($SPX Sells Off)

$SPX sold off after QE4+ announcement
The Federal Reserve officially announced QE4+2 yesterday. In addition to asset purchases, the Fed is now tying economic data to the federal funds rate. The FOMC statement said it would consider raising the federal funds rate above 0%-0.25% if the unemployment rate fell to 6.5% or the inflation rate hit 2.5%. During Chairman Bernanke's press conference yesterday (embedded below), he warned about the fiscal cliff and said the Fed didn't have the tools to offset fiscal tightening. Nothing really new.

It looks like traders sold the QE4+ news. The market actually spiked yesterday but closed unchanged/negative. $SPX is down another 0.60% today. Now the market is waiting on a fiscal cliff agreement. $SPX is still above key moving averages but it pierced through the near-term uptrend. Keep an eye on the bull market trend line. Going forward it will be interesting to see how gold, Treasury bonds, the U.S. Dollar and equity indices price in economic growth versus the prospect of tightening. Or if risky assets will even care that much about QE anymore. Are we at the end of the reflation party? And with fiscal tightening coming either way (Ray Dalio yesterday at the DealBook conference), as well as potential volatility ahead for longer-term rates, it seems like we could be in for some surprises soon.

Bernanke: Federal Reserve's Tools Can't Offset Fiscal Tightening; U.S. Hits Debt Ceiling In Early 2013 (QE4 Possible)

With the fiscal cliff (automatic tax hikes and spending cuts) arriving on January 1, 2013, Federal Reserve Chairman Ben Bernanke, in a speech given at the Economic Club of New York on November 20, 2012 (1:12 in the video), wanted to remind everyone that monetary policy can't offset fiscal tightening. He said, "I don't think the Fed has the tools to offset that. And that's why it is important for Congress to address these fiscal issues soon and in a bipartisan way."

$SPY vs. Federal Reserve QE and EPS Deflation (10/23/2012)

The S&P 500 ETF ($SPY) broke through April 2012 support today and is now testing a 1-year uptrend line and rising channel, which formed during the 2011 equity crash when Congress raised the debt ceiling and Standard & Poor's downgraded U.S. government debt. It is interesting that the S&P 500 peaked when the Fed announced QE3 on September 13, 2012. David Rosenberg, chief economist and strategist at Gluskin Sheff, said it is because "corporate earnings are on the down escalator." So QE is now battling EPS deflation.


source: freestockcharts.com


But if $SPY breaks down here, it could still find refuge (possibly) at the ultimate bull market uptrend line. That will be a fun line to watch when it gets tested, and even better if there is lower than average volatility.

FED/ECB Statements (August 1-2) - No QE3 and No Action by ECB (TEXT)

No QE3 by the Fed + no action by the ECB = bearish for risk assets.

FOMC Preview: QE3 vs. Forecast Extension; Economic Trends to Watch

Zero Bound Fed Funds Rate 0%
(St. Louis Fed)
Will the Fed enact QE tomorrow, stay put, or extend its forecast until the market crashes, unemployment rises, or a recession finally gets realized? Below are charts of economic trends to keep an eye on (backward looking of course). The FOMC meets again on September 12-13. Look at the Federal Funds rate since 1954. It is currently at the zero bound (0%), a level never seen before on the chart. The rate was just under 20% in the early 1980s. See a table of daily Federal Funds rate data at the New York Fed ("by trading government securities, the New York Fed affects the federal funds rate, which is the interest rate at which depository institutions lend balances to each other overnight"). 

Here are some views on what to expect in tomorrow's policy statement.

    FOMC Statement, Fed's Economic Projections and Bernanke's Press Conference Video (4/25/2012)

    Source: federalreserve.gov/monetarypolicy/files/fomcprojtabl20120425.pdf
    If interested, here is yesterday's FOMC statement, the Federal Reserve's economic projections for 2012-2014 (change in real GDP, unemployment rate, PCE inflation and core PCE inflation from January's projections), and a video of Federal Reserve chairman Ben Bernanke's press conference.

    The "central tendency" of the Fed's real GDP projection for 2012 rose to 2.4-2.9 from 2.2-2.7 in January, but for 2013 its projection declined to 2.7-3.1 from 2.8-3.2 in January. The central tendency "excludes the three highest and three lowest projections." Click the image for further review. Jim Rogers recently told Fox Business that the U.S. is due for a recession in 2013. They occur every 4-6 years.

    FOMC Statement, Stress Test Results and JP Morgan Increases Dividend

    FOMC Meeting (Wikipedia)
    In its latest statement, the Federal Reserve's Federal Open Market Committee (FOMC) said the economy was growing, the unemployment rate was declining, and there was low inflation. But the Fed is sticking with accommodative policy by keeping its "target range for the federal funds rate at 0 to 0.25 percent", and "maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction." 

    Right now gold and Treasury bonds are crashing, while the S&P is rallying hard. This could have been pricing in JP Morgan's dividend hike or the results of the Fed's bank stress tests"The bank said in a statement that the Federal Reserve has informed the company that it did not object to its plans to distribute capital." (Reuters/Yahoo). Citigroup, Ally Financial, MetLife, and SunTrust all failed (Reuters/CNBC).

    Read the FOMC statement here or below.

    Fed Sees 0% Fed Funds Rate Through 2014! (Economic Projections Table)

    In today's FOMC statement, they decided to keep the federal funds rate at 0-0.25% and anticipate "exceptionally low levels for the federal funds rate at least through late 2014." ZIRP! They also "decided to continue its program to extend the average maturity of its holdings of securities as announced in September" (operation twist). Below is the full release and a table of their projections for GDP growth, PCE inflation and the unemployment rate. They lowered their GDP growth projection for 2012 and 2013 from November, lowered their unemployment rate projection, and kept PCE inflation slightly unchanged. I also embedded Bernanke's press conference.


    FOMC Statement Kills S&P Rally, No QE3; EUR/USD Gets Merk'd

    The Fed didn't announce QE3 today (which was expected I think), so traders sold the news. Maybe next time. The S&P is still holding the downtrend from July, and the US Dollar Index (DX) broke through the October and November highs today. DX is currently trading at 80.31. EUR/USD got Merk'd today before the S&P sold off (WSJ: Merkel Rejects Raising Lending Limit For ESM-Govt Lawmaker). ESM = European Stability Mechanism: "In July 2013, the ESM will assume the tasks currently fulfilled by the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM)." (ec.europa.eu).

    Tom DeMark thinks the S&P hits 1330-1345 by Dec 21. What will DeMark the market to 1,330? A payroll tax cut extension? NYT: House Passes Extension of Cut to Payroll Taxes. Democrats are against it though. This is interesting: Japan Continues To Support Europe At EFSF Auction (NASDAQ). The S&P closed at 1,225 today and is barely holding on to its 50 day moving average. Below are intraday charts of SPY and EUR/USD.

    Fed's November Economic Projections, FOMC Statement and Bernanke's Press Conference (11/2/2011)

    Nothing much has changed... The Fed is keeping rates at 0% and plans to "continue its program to extend the average maturity of its holdings of securities". Watch Bernanke's press conference after the jump (here is the transcript). If they announce QE3, which could be in the form of "large scale MBS purchases" (that was Fed Governor Daniel Tarullo's idea), then that could change the game. Here's a snapshot of the Fed's economic projections vs. June. They lowered their real GDP projections and raised unemployment rate projections.


    Full PDF: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20111102.pdf

    After FOMC Statement, Stocks Fall, Treasury Bonds Spike (SPY, TLT, UUP, FXE 9/21/2011)

    In today's FOMC statement, the Federal Reserve decided to "extend the average maturity of its holdings of securities" on its balance sheet, aka "operation twist", to "support a stronger economic recovery". With no additional asset purchases involved (QE3), the stock market and EUR/USD plunged, while Treasury bonds and the U.S. Dollar (safe havens) spiked. Also, the problems in Europe and the global economic slowdown provided additional support for that trade (imo). See the full FOMC statement after the jump.
    "The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."

    Here is a chart showing how $TLT (20+ Treasury Bond ETF), $UUP (U.S. Dollar Index ETF), $FXE (Euro Index ETF) and SPY (S&P 500 ETF) reacted to the news.


    source: freestockcharts.com

    FOMC Statement: Downside Risks To Economic Outlook, Low Fed Funds Rate Through Mid-2013

    Federal Reserve (Source: Flickr)
    Below is the full text of today's FOMC statement released by the Federal Reserve. FOMC members didn't announce QE3, but said ZIRP (zero percent interest rate policy) is expected through mid-2013.

    "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."

    They also see a "slower pace of recovery over coming quarters" and believe "downside risks to the economic outlook have increased".