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FOMC Meeting - Still No Inflation Worries

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The Fed held an uneventful meeting today. As expected, the target range for the federal funds rate remains at the record low of 0% to 0.25%. Also, the Fed stated that it intends to continue policies that it first announced in the last meeting such as its plan to purchase $1.25 trillion of agency mortgage-back securities. High inflation doesn't seem to be of any concern. From the Fed's press release:
In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

And consequently, the Fed intends to keep rates low for a while:
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.

Refer to this CNN article for more review of the Fed meeting and the economy.

So I'm afraid we should expect low deposit rates to continue. The question is how long? Which CD terms would be the best? 3-month, 6-month, 12-month, 24-month? Even though it would seem we should be seeing high inflation before too long due to all the deficit spending, it's not easy to time. I remember many people last summer where predicting higher interest rates by the end of 2008. So if you're considering CDs, you might want to spread it across several maturities in a CD ladder approach. This can take the guess work out of predicting future interest rates.


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Comments
11 Comments.
Comment #1 by Anonymous posted on
Anonymous
Regarding inflation, it should be noted that in today's GDP report the chain deflator rose by a greater than expected 2.9%. The Fed's outlook on inflation may be wishful thinking.

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Comment #2 by Anonymous posted on
Anonymous
statistics are all B.S. I believe we have a case of inflation in certain areas and deflation in other areas.

When inflation was supposedly going up last year in the Summer, the Fed cut interest rates (the opposite of what you're supposed to do). Now that they've cut rates to close to "0", they claim there's no inflation. Yeah, right. Let's see who else did that, Japan?

I have a feeling we are headed down the Japan path when it comes to rates. I expect this administration to artificially depress rates (and keep them depressed) for a very long time. It's funny, cause didn't they blame the current crisis on extened period of low interest rates? So, now we're doing it again?

Any way you cut it, they want you to borrow until you drop dead and NOT save a dime.

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Comment #3 by Anonymous posted on
Anonymous
I don't get it, Obama pumped billions of dollars in the market, and all those bailout and stimulus, how con there be no inflation? and NOBAMA

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Comment #4 by Angelo_Frank (anonymous) posted on
Angelo_Frank
I agree regarding "heading down the Japan path". The Fed will continue to artificially depress rates for the next three to five years, at least. Get used to these low rates or move your funds into riskier holdings such as equities or corporate bonds.

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Comment #5 by Anonymous posted on
Anonymous
With the extra trillions of Dollars printed and the Government borrowing extra of trillions Dollars from abroad, where is all that money gone?

Money does not disappear in thin air, therefore, we are all blinded by the FEDs fantasy and make believe statements, not supported with facts but pure lies. We must be idiots to fall for such untrue findings by FOMC.

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Comment #6 by Anonymous posted on
Anonymous
Let me get this straight.
Treasury is printing money, the Government is borrowing money, SS trust fund is raided, FEDs are buying long term bonds with printed money to keep the rates artificially low and now they are saying there is no inflation for foreseeable future,
they must think we are bunch of uneducated lambs waiting to be slathered without any complaint or resentment. They are fooling themselves and not the public at large. Who ever buys into their statements must be really stupid and ignorant.

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Comment #7 by Anonymous posted on
Anonymous
Let me straighten you out....

The Treasury does not "print money." The Federal Reserve controls the amount of money in circulation; they can put it in and they can take it out.

The Social Security Trust Fund has not been "raided." In fact, it can't been "raided."
By law, it can only invest in the safest security in the land -- U.S. government-issued treasuries.

Now that I've educated the lamb, perhaps he'll realise the unprecedented amount deflation occurring as all kind of of profit-on-paper evaporates. I can guarantee that someone didn't "unprint" the value of homes or stocks over the last year.

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Comment #8 by Anonymous posted on
Anonymous
To Anonymous, at 9:49 AM, April 30, 2009

You our own La, La Land. Get real!

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Comment #9 by Anonymous posted on
Anonymous
Whether physical money is printed or not is not the exact point.
But when one branch of our Federal government issues billions in bonds and another Federal department purchases those very same bonds is pure manipulation keeping the interest rates artificially low and at some point creating inflation down the road.

Also the Federal government may not have actually taken the money out of the Social Security Trust Fund, but they did borrow against it, effectively raiding it to pay down part of the national dept.

I believe if hyper inflation ever appears on the horizon, our nation with it's trillions of dollars budget deficit, is financially doomed. It could not withstand the higher interest rates that will be needed to regain control of the impending inflation scenario. Of course that's just my opinion.

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Comment #10 by Anonymous posted on
Anonymous
To the poster: Anonymous, at 9:49 AM, April 30, 2009.

You are either naive or ignorant of the real problem.
FEDs are the problem with their wild fantasy of shuffling money left and right, printing money like there is no tomorrow, selling us unbelievable findings of facts and making our hard earned money to become worthless in near future. And yes, our SS trust fund now is owned by the bond holders paid with printed money which can never be repaid back with real money again.

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Comment #11 by Anonymous posted on
Anonymous
Now its my turn to educate the lambs...


The FEDeral Reserve is IN NO WAY A PART OF THE U.S. GOVERNMENT, rather the FEDeral Reserve IS A PRIVATE CORPORATION.


Do your homework on how the Fed was created and who was part of that. Now take note that the decision makers within the Fed just so happen to have their hands in some of the biggest banks in the country and you'll see that they've got us all by the balls and have for decades.

Support the bill to bring to this corrupt system by auditing the Fed...

http://www.campaignforliberty.com/campaigns/auditthefed.php

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