FOMC just ended its meeting on interest rate. Not surprisingly, the Fed rate is kept at 0.25%, given the recent wave of bad news on housing, retail, and employment. What does Fed have to say this time? In the FOMC statement from the April meeting, it said “…Growth in household spending has picked up recently…Housing starts have edged up…”. It is no longer the case. Since Fed had already have an extremely low interest rate, the main question before the meeting is what they can do to fuel the recovery. They just ended the asset purchasing program back in March. If they ever re-start the programs, it will send a powerful negative signal to markets that how bad things are and they are worried. And actually, the credit markets do not need more liquidity now, unlike September 2008.
The latest statement acknowledged the weakness in the housing market and retail, but reiterate Fed’s belief of “a gradual return to higher levels of resource utilization in a context of price stability”. Thomas M. Hoenig is again the only member voting against the low interest rate. Overall, this statement is very moderate. It is very modest and gives out nothing unexpected. Basically it means that Fed is now taking a “wait and see” attitude. This hand-off approach should have little impact on stock markets. (un 23, 2010)
