2012 Economic Calendar
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FOMC Meeting Announcement
Released On 9/13/2012 12:30:00 PM
PriorConsensusActual
Federal Funds Rate - Target Level0 to 0.25 %0 to 0.25 %0 to 0.25 %

Highlights
The Fed left policy rates unchanged but engaged in other policy measures. Guidance has been extended to at least through mid-2015. The Fed did move into another round of quantitative easing with so-called QE3. The Fed will purchase additional agency mortgage-backed securities at a pace of $40 billion per month. No end date was stated. The interesting issue here is that the Fed is not buying Treasuries. There may have been concern that further purchases of Treasuries would have been disruptive of credit markets.

The Fed continues to reinvest pay down on agency debt and mortgage-backed securities. Operation Twist also continues as earlier planned through December of this year.

The FOMC pointed to problems in the labor market and implicitly Europe for its latest policy moves. Inflation was seen as benign but that may not last.

"The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective."

Richmond Fed President Jeffrey M. Lacker voted against the statement. He opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.

Equities rose on the news. Basically, rates are going to stay low. The big question is whether that is going to make any difference compared to Fed policy prior to this FOMC. Fiscal policy likely is still the main question. The Fed already was extremely accommodative and it is hard to tell the difference with today's moves.

Still ahead today are the Fed economic forecasts at about 2:00 p.m. ET and the chairman's press conference at 2:15 p.m. ET.


Market Consensus before announcement
The FOMC announcement at 12:30 p.m. ET for the September 12-13 FOMC policy meeting is expected to leave the fed funds target unchanged at a range of zero to 0.25 percent (yes, the meeting is Wednesday/Thursday instead of Tuesday/Wednesday). However, many traders and analysts believe the Fed will extend guidance beyond 2014. There are mixed views on whether there will be an announcement of additional quantitative easing. Also, the Fed will release its quarterly forecast between the announcement and the chairman's press conference, generally about 2:00 p.m. ET.

Definition
The Federal Open Market Committee (FOMC) is the policy-making arm of the Federal Reserve. It determines short-term interest rates in the U.S. when it decides the overnight rate that banks pay each other for borrowing reserves when a bank has a shortfall in required reserves. This rate is the fed funds rate. The FOMC also determines whether the Fed should add or subtract liquidity in credit markets separately from that related to changes in the fed funds rate. The Fed announces its policy decision (typically whether to change the fed funds target rate) at the end of each FOMC meeting. This is the FOMC announcement. The announcement also includes brief comments on the FOMC's views on the economy and how many FOMC members voted for and how many voted against the policy decision. Since the last recession, the statement also includes information on Fed purchases of assets, so-called "quantitative easing", which affects longer-term interest rates. Also, a key part of the announcement is guidance on potential changes in policy rates or asset purchases.  Why Investors Care
 
[Chart]
The Fed closely monitors the core PCE price index to indicate whether or not policy is approximately correct, overly accommodative, or too restrictive. The PCE price index is preferred to the CPI because it is more closely aligned to the cost of living than the CPI (which measures a fixed basket of goods & services.) This chart covers monthly data and the fed funds target rate reflects the monthly average. As such, it will not correspond to the most recent fed funds rate target announced by the Fed.
Data Source: Haver Analytics
 

2012 Release Schedule
Released On: 1/253/134/256/208/19/1310/2412/12
 


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