Highlights
Although the Fed to no one's surprise, kept its policy rates unchanged, the latest FOMC statement is slightly more positive about the economy than the late September announcement. With caveats about weak spots in the economy, the Fed said that the economic conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed still plans to expand its purchases of mortgage-backed securities but at a slowing pace. The Fed has completed its purchases of longer-term Treasuries and expects to conclude its purchases of mortgage-backed securities and agency debt by the end of the first quarter of 2010.

The vote to retain the fed funds target at a range of zero to 0.25 percent was unanimous-10-0.

The language in the latest FOMC announcement was slightly more optimistic than last time but there are still several red flags noted. The Fed sees overall economic activity as having improved.

"Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months."


While housing has improved, the consumer sector is still suspect and business investment is slipping.

"Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales."


Due to "substantial resource slack," the FOMC sees inflation remaining "subdued for some time."

But what markets are not giving much attention is the Fed's comment that "economic activity is likely to remain weak for a time." It appears that the Fed is again calling for a very slow recovery-and one in which the consumer sector is sluggish.

Equities added to the day's gains after the FOMC statement release.

Market Consensus Before Announcement
The FOMC announcement for the November 3-4 FOMC policy meeting is expected to leave interest rates unchanged. However, the big debate is when will the Fed start withdrawing liquidity in its hugely expanded balance sheet. And does the Fed have insight on the strength of the recovery that we have not heard about yet? Economists and traders will be picking apart the announcement for changes in balance sheet plans and Fed views on the economy.

2009 Release Schedule

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