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Fed Still Saying Exceptionally Low Rates for Extended Period - Update 3


The second scheduled FOMC meeting of 2010 ended this afternoon, and the press release looks very similar to January's press release. 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.

The first sign of future rate changes will be when the Fed replaces the "extended period" to something like "low for some time". Thomas Hoenig, one of the inflation hawks in the FOMC, is pushing for this change and voted against today's policy action. Here's what the press release included regarding Hoenig's vote:

Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.

According to this RTTNews article, "some say a change in the language of the Fed's commitment to keeping rates low for an 'extended period' could come during the next few meetings." We'll see what happens. The next three FOMC meetings are scheduled for April 27-28, June 22-23 and August 10.

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Shorebreak   |     |   Comment #2
All to keep the shell game on Wall Street going for as long as possible. Under the Bernanke-Geithner-Summers Cabal there won't be any rate increases. After all the savers are pummeled, with deposit rates that are unbearable, and start joining the herd running into stocks then the boys at Goldman will pull the plug and leave the little people holding the empty bag just like before. This is just Part II of the largest transfer of wealth in history.
Anonymous   |     |   Comment #4
I am not sure who are the Booya boys, but the maaaaaket is probably referring to the stock market.  Long term bonds are going to take a pummeling if interest rates rise.  If you are going to invest them, you better be prepared to go the long term.  As for myself, I prefer to buy bonds when prices are low (along with a higher rate) as opposed to when prices are high (along with a lower rate). 
Anonymous\\\   |     |   Comment #5
Anonymous   |     |   Comment #6
The Fed does not control interest rates.  We're talking about a TARGET rate.  Look at $IRX.  When that hits .025%, we WILL get a rate rise.
Gaelicwench   |     |   Comment #7
"...keep bank rates low so savers will spend it....."

That's precisely what I was thinking. The big banks are refusing to part with "our"  money in the way of loans because there's more of that to be made elsewhere! This in turn sets people up for fees and misc. charges ad nauseum.


"Hang in there savers, hold onto it as long as you can....."

Exactly! That is certainly my plan; I don't care how low the rates are currently.