FOMC Ends The QE Dream, Keeps “Considerable” Period Hopes Alive

“Steady as she goes” was expected… having kept the “considerable time” dream alive last month, the FOMC ended QE3 on schedule but remained ‘data-dependent’ on reviving it…

• *FED ENDS THIRD ROUND OF QUANTITATIVE EASING AS PLANNED
• *FED SEES `SOLID JOB GAINS’ WITH LOWER UNEMPLOYMENT
• *FED: UNDERUTILIZATION OF LABOR RESOURCES GRADUALLY DIMINISHING
• *FED REPEATS RATES TO STAY LOW FOR `CONSIDERABLE TIME’
• *FED REPEATS RISK OF BELOW-TARGET INFLATION DIMINISHED SOMEWHAT
• *FED SAYS LOWER ENERGY PRICES TO HOLD DOWN INFLATION NEAR TERM
• *KOCHERLAKOTA DISSENTS AT FOMC, SEEKING QE CONTINUATION

And so now the “flow” has stopped; given that “bond buying” did not work, we are reminded of Alan Greenspan’s warning that  “I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner.

Here is how the Fed pretends it has rarely been more optimistic about the economy:

The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability.

Accordingly, the Committee decided to conclude its asset purchase program this month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. 

Pre-FOMC: S&P Futs 1975, 10Y 2.32%, Gold $1225, WTI $82.75

And so now the “flow” has stopped