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Fed Still Saying Exceptionally Low Rates for Extended Period

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The FOMC meeting finished today, and as expected the fed funds rate remains near zero (0 to 0.25%). There had been some expectations that the Fed would change their language to indicate possible higher rates in the future. Last month Barron's published commentary making a reasonable case that the Fed needed to start implementing its exit strategy with a hike in the federal funds rate to levels above the financial crisis level. Today's FOMC statement didn't have any hints of such a change. It continues to say the same thing about keeping the federal funds rate exceptionally low for an extended period:
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

There had been reports that some on the FOMC were starting to worry about inflation, but today's statement doesn't show any real concerns. As described in this Baltimore Sun article
"The committee appears split between hawks and doves on the timing of and reasons for changes in policy," said Joseph Brusuelas, a Fed watcher at Moody's Economy.com. After Wednesday's Fed statement, he said, "The doves continue to carry the day."

There's one more FOMC meeting scheduled for 2009 on December 15-16.


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Comments
12 Comments.
Comment #1 by Anonymous posted on
Anonymous
Of course they are going to stay exceptionally low. Why not? When you have morons giving the govt. money for free (remember those Ibonds paying out 0%?),then why would they raise interest rates? The banks and the govt. love fools who fight over 1 and 2% savings rates. I'm sure even they didn't think they public would be duped so easily.

You can so tell where we are headed. We have followed Japan's footsteps to a "T". Even if they do ultimately raise interest rates (yeah right), they will bring it right back down again. This country is addicted to credit. And there are just too many morons who are willing to part with their money for little to no return on their money, so why not keep the rates low?

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Comment #2 by Anonymous posted on
Anonymous
Loose money Ben is a monkey. He, along with Timmy The Treasury Dolt, have made it clear they WANT inflation to erase the gigantic US debt. Morons and fools, fools and morons.

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Comment #3 by Anonymous posted on
Anonymous
People are grasping 1-2% interests rates for their hard earned money to preserve their principle. They don't want to see their money vanish into a big black hole called the stock market. The stock market is no longer a vehicle for "investors", it's a trap set by financial institutional "traders" backed by who else, the Federal Reserve of all things. The ordinary citizen, worker, doesn't stand a chance these days.

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Comment #4 by Anonymous posted on
Anonymous
This is all a planned strategy by the Fed to benefit Goldman Sachs, and the other big Wall Street banks, to continue the lucrative carry trade as long as possible. Receiving billions of dollars at virtually zero interest, buying Brazilian bonds paying high interest, and getting the currency exchange bump on the decaying dollar at the same time.

We are indeed entering a lost decade like Japan. Don't look for higher deposit rates for years. Look at the price of gold. Don't you think the buyers of precious metals see "Helicopter Ben" just creating money out of thin air and dropping it into the economy?

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Comment #5 by Anonymous posted on
Anonymous
Who needs healthcare "death panels"? It's the FOMC that is keeping interest rates low to starve us seniors to death.

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Comment #6 by Anonymous posted on
Anonymous
The Fed is playing out exactly the script that Ben Bernanke suggested in his academic work prior to joining the Fed: keep rates near zero, promise to keep them there for an extended period of time to help bring intermediate term rates low, and if needed use quantitative easing to increase the money supply in the event of a liquidity trap.

The Fed will first stop the quantitative easing (the buying of long-term treasuries and mortgage paper) before it considers raising rates. It is done with its program of buying $300 billion of long-term T-notes, and will finish up its $1.25 billion MBS buying program by the end of the first quarter. It slightly reduced its plan to buy agency debt from $200 billion to $175 billion.

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Comment #7 by Anonymous posted on
Anonymous
We are well aware of what the Fed is doing. And painfully aware of how it is HURTING us frugal savers who were wise enough not to try to live beyond our means. Many, many thrifty seniors are paying the price for the foolishness and greed of others.

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Comment #8 by Mary (anonymous) posted on
Mary
What thrifty savers want is to make money with no risk and no work. The bank CD has been a wonderful investment vehicle for the last twenty years, however, maybe they were too good to be true. Keeping money safe has been a very difficult endeavor for hundreds of years; our banking system does that quite well. Now we are all spoiled and think we should, also, be able to make money from that same protective system. Fortunately, Banking Guy provides us the information to continue using the banking system as an investment vehicle.

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Comment #9 by Snippy (anonymous) posted on
Snippy
re: Mary @9:32 - I think you're right, but you're thinking clearly and objectively, and you're talking sense, so don't be surprised or offended if your comment is met with negative remarks.

An awful lot of the comments left here trend toward political rants, name calling, paranoia, venting of impotent rage, and government conspiracy theories.

It's odd that the same folks who leave those comments even take the time to read Banking Guy's blog posts, which contain useful information, good suggestions, and common sense -- little of which appears in a lot of their comments.

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Comment #10 by Anonymous posted on
Anonymous
Well it certainly wasn't thrifty savers and frugal people that toppled the U.S. financial system.

Get your facts strait, Snippy! And then you too might also learn something from history.

Banking Guy does have a great site here. One of the best. Most of us long time followers use it as a savings guide, not an investment vehicle. And there is nothing wrong with expecting a decent interest rate from the banks in return for loaning our money to them.

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Comment #11 by Anonymous posted on
Anonymous
Re: Mary "What thrifty savers want is to make money with no risk and no work."

What an idiotic post. What are elderly retired people supposed to do? Put their money into some risky aggressive growth mutual fund and lose 60% of their nest egg? Of course not, the prudent course is to put their money into insured certificates of deposit, savings accounts, and money market accounts. Haven't the clowns at Goldman Sachs et al schemed those that have been the backbone of this economy for the past half a century enough out of their hard earned savings? Get real Mary.

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Comment #12 by Anonymous posted on
Anonymous
Amen!

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