Hi all,
The Fed announcement came out.
A couple of noteworthy statements.
The first, which was widely expected, is that the Fed will
purchase $45 billion per month of long-term Treasury securities beginning at
the start of 2013 to replace the Operation Twist program which expires at the
end of this year. This will be in addition to the $40 billion of MBS that the
Fed now purchases monthly.
The second change from the Fed was not expected to take place
at this meeting. For the first time, the Fed announced that it will keep the
fed funds rate at very low levels until certain economic targets are reached.
Specifically, the fed funds rate will remain low until unemployment falls below
6.5% (currently at 7.7%) and inflation tops 2.5% (currently below 2.0%). Fed
Chief Bernanke stressed that these are just guidelines to help investors
understand what factors are influencing Fed policy and that the Fed will not be
obligated to act immediately if these levels are reached.
The MBS has improved slightly as a result.
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