Most importantly within the FOMC statement, they reiterated that the MBS/agency debt portion of QE will end by March and that the fed funds rate will remain “exceptionally low” for an “extended period” just as should have been expected. The Fed likely wants to see how the market responds by month end to the finish of QE before they alter the wording. If all goes smooth, I believe this wording will change. Hoenig again dissented and said the wording should go as the policy “could lead to the buildup of financial imbalances and increase risks to longer run macroeconomic and financial stability.” In other words, lets not repeat the mistake of too low for too long that helped create the credit bubble. The inflation wording was dovish and the same as has been seen and the economic comments were a touch more positive with the same caveats as the Jan comments. Bottom line, today is a non event but expect a change in Apr.

Category: MacroNotes

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