Highlights
The FOMC again kept its target rate unchanged at zero percent to a quarter percent and maintained its plan for quantitative easing as announced in recent FOMC meetings. The Fed left the discount rate unchanged at 0.50 percent. Notably, the FOMC made a modest upgrade for the economy, stating that "the economy has continued to contract, though the pace of contraction appears to be somewhat slower." Nonetheless, the Fed sees a sluggish economy continuing with "economic activity is likely to remain weak for a time." There is an expectation that monetary and fiscal policy will lead to stabilized financial markets and economic recovery but no timetable was given. Also, inflation is expected to be subdued.

There was no change in the Fed's announced plan for expanding its balance sheet.

"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."

Some may see the Fed as not being aggressive enough in expanding its balance sheet to inject additional liquidity. Although not stated, this may be due to concern by some FOMC participants that the combination of about $2 trillion in expansion of the Fed's balance sheet with additional deficit spending of $2 trillion by the Treasury in coming quarters is going to be very stimulative at some point. However, the vote for today's Fed action was unanimous, 10 to 0.

Markets saw the statement much as expected as equities were little changed immediately after the announcement.

Market Consensus Before Announcement
The FOMC announcement for the April 28-29 FOMC policy meeting is expected to leave the fed funds target range unchanged at zero to 0.25 percent since the Fed has announced it expects to maintain a low fed funds rate for some time. Instead, markets will be focusing on two things - any language that says FOMC participants believe the contraction is not as severe and how well quantitative easing is working. The Fed will likely discuss whether a Plan B is needed for the flop thus far for TALF. There has been little participation in this program intended to loosen up credit markets for consumers and small businesses.

2009 Release Schedule

Released On: 1/28 3/18 4/29 6/24 8/12 9/23 11/4 12/16