The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.'
'In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent, and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
'As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.
'The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of financial and economic developments.'
No real change in this section of the statement. The Fed funds rate is going to be pegged close to zero for the foreseeable future, and there is no change in the amount of non-traditional assets (Agency MBS, debt and long-term T-notes) the Fed is planning on buying. This is not really a surprise, but it will also probably come as a relief to the bond market that the pace of quantitative easing is not accelerating.
As it is, it will be very difficult for the Fed to pull back from these programs once the economy does gain some traction. Unless they are able to do so in a timely fashion, they have sown the seeds for much higher inflation down the road. However, high inflation is likely to be a late 2010 or 2011 issue, not a 2009 issue.
'Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.'
'Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.'
Peace and harmony prevailed at the meeting -- everyone agreed with the statement.
