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Fed Still Saying Exceptionally Low Rates for Extended Period - Update 2


The first scheduled FOMC meeting of 2010 ended this afternoon, and the press release looks like a copy of December's press release. There continues to be no hint of when the Fed will start hiking rates. The Fed 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.

A small change did occur. One committee member, Thomas Hoenig, voted against the policy action. Hoenig is one of the few inflation hawks. He's now a voting member on the committee for 2010. Here is an excerpt from the press release regarding his vote:

Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.

Note, he was only against the expectation of exceptionally low levels which seems quite reasonable. Unfortuantely, he was the only member voting this way.

On related news, it looks like Bernanke will be serving another four years as Federal Reserve Chairman. According to the Washington Post, "The Senate on Tuesday moved to clear the way to confirm Ben Bernanke to a second term as Federal Reserve chairman, setting a procedural vote for Thursday in a sign that the needed votes were now secured."

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Anonymous   |     |   Comment #2
To poster #1. You are not seeing the whole picture before concluding and judging.
First, banks got used to borrow free money, second, wall street enjoys the new fools that are coming in droves and third, printing money without cover, dilutes your savings and investing on long run (inflation comes in many forms including the hidden one).  The FEDs created a monster with TARP and bailing out AIG, that I doubt they will end it properly. Bernanke became wall street puppet and we are going to pay for his mistakes down the road. The big banks invested the TARP money in wall street and ripped the benefits and paid most of it back without any cost to them or lessons learned. Created liquidity only helps wall street, not the consumers. Continuing down this road of 0% interest rates, will create unsustainable growth in future. "When a cow gives you free milk, you have no reason to ever buy milk at a fair price." Therefore, FEDs are playing with fire and most of us will burn from his failure to act now while the iron is still hot.
Anonymous   |     |   Comment #3
A RAISE NEEDS to be put in effect.  The low cost - and even free-  money that is and has been available is NOT the answer.    A fair rate of 5% for savers would help more than hurt. I know I would have more money to spend. 


Ed Flint
Ed Flint   |     |   Comment #4
 Savers should be given a medal of honor and a huge tax break for financing this bailout.


Anonymous   |     |   Comment #5
I would have never thought that it would come around when the old passbook savings rate before the institution of money market rates in the early 1980s would have become a more desirable choice.  I remember those 10% rates offered back then and how people were angry at how paltry the passbook rate was.
ichaelm   |     |   Comment #7
How do we nominate Thomas Hoenig for Bernanke's job???