Federal Reserve Bank
- Previous meeting (12/18):
hold at 0-0.25%
QE cut by $10b to $75b
- Latest meeting (1/29):
hold at 0-0.25%
QE cut by $10b to $65b
- Next meeting:
Headlines for US and USD
- Silver Lining for Disappointing GDP data
- FOMC minutes show the Fed will change guidance as the unemployment rate falls
- US January PPI 1.2% vs 1.2% y/y expected
- January US housing starts 0.880m vs 0.950m exp m/m
- USD/JPY – Slight Losses As Markets Eye US Inflation, Fed Minutes
- EUR/USD – Quiet Ahead of US Key Events and Fed Minutes
- February US Empire state manufacturing 4.48 vs 9.0 exp
- Setting up a Trade Idea for USD/JPY (2/17/2014)
- Gold Technicals – Stable Below 1,250 Post FOMC Minutes
- USD/CAD – Loonie Edges Higher After Mixed US Numbers
- Putting on a Synthetic Short GBPUSD Trade
- NZDUSD Back at Resistance; Going Short Again
- USD/JPY – Trapped in an Ascending Triangle, Looking for Breakout
- EUR/USD Falls to Rising Support; EZ Flash PMIs
- Gold Technicals – Bearish Momentum Strong But Bulls Are Still In With A Shout
- Time to Go Long USD? Trades Emerge on AUDUSD and NZDUSD
- GBPUSD resilient, waiting to spring higher for key 1.6877, 1.7000 & 1.7043 targets!
- USD/CAD Engulfer and S20-R40
- USDCHF and CADCHF: Technical Outlook
- EURUSD, AUDUSD – Technical Outlook
Feb . 11 – Yellen presented the Semi-annual Monetary Policy Report to the congress, speaking before the Committee of Financial Services for the first time as Fed Chair. She reaffirmed the Fed’s intent on trimming QE. The FOMC has voted twice to cut purchases of mortgage backed securities and long-term treasury securities, reducing the rate of purchase in each asset from $40b to $30b, or a total of $80b to $70b.
A recent hitch in the jobs market and the economy as a whole due to the inclement winter weather was not on Yellen’s radar of concerns as she kept a familiar tone on familiar subjects.
She reiterated the FOMC’s projection of the low interest rate to continue after the end of QE:
“The Committee has emphasized that a highly accommodative policy will remain appropriate for a considerable time after asset purchases end. In addition, the Committee has said since December 2012 that it expects the current low target range for the federal funds rate to be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation is projected to be no more than a half percentage point above our 2 percent longer-run goal, and longer-term inflation expectations remain well anchored.” – Excerpt from Yellen’s opening statement
Jan. 29 – The FOMC, with Bernanke’s last meeting as chairman, voted to further reduce QE by $10b to $65. The pace of purchase in MBS and long-term Treasury securities each going to be reduced from $35b to $30b. Tapering continues at this slow pace while the interest rate remains low on the horizon. Until unemployment falls to 6.5%, this rate is likely to remain low. Repeating what it has been saying, the FOMC says:
“The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.” - Excerpt from official statement
Dec. 18 – The FOMC voted for the first cut to the quantitative easing program. It plans to reduce the rate of MBS from $40b to $35b, and to reduce the rate of purchase of long-term Treasury securities from $40b to $35b, taking the total down by $10b from $85b to $75b. Though the economic outlook has picked up the second half of the year, the historically low interest rate will stay the same. The statement says:
“To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.” – Excerpt from official statement
Oct. 30 - The 10/30 FOMC meeting was the first after the government shutdown. That along with unimpressive employment data of late prompted the Fed to delay tapering. While it stays course with the same forward guidance, the bank noted that a slower economic recovery has made it hold off tapering until better data. Nothing surprising, as the market has been pricing in a March taper. Now it will be up to economic data especially jobs data to give the market direction on of the USD. The statement says:
“Taking into account the extent of federal fiscal retrenchment over the past year, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.” – Excerpt from the official statement
About the Federal Reserve Bank
The Fed Mandate/Objective:
Congress has established 3 objectives for the Fed. They are
1) Maximum employment – no fixed rate but has a central tendency of 5.2-6.0%
2) Stable prices – controlling inflation with 2% year-on-year target using the personal consumption expenditure (PCE) measurement.
3) Moderate long-term interest rates
The FOMC decides on how to carry out these mandates, and the 12 Federal district banks carry them out.
The 12 Federal Reserve Banks form a major part of the Federal Reserve System, the central banking system of the United States. The 12 federal reserve banks together divide the nation into 12 Federal Reserve Districts, the 12 banking districts created by the Federal Reserve Act of 1913. The twelve Federal Reserve Banks are jointly responsible for implementing the monetary policy set by the Federal Open Market Committee. Each federal reserve bank is also responsible for the regulation of the commercial banks within its own particular district. (wiki: http://en.wikipedia.org/wiki/Federal_Reserve_Bank).
Learn more about the 12 Federal Reserve Districts from the Federal Reserve website: http://www.federalreserve.gov/otherfrb.htm
Federal Open Market Committee (FOMC)
The committee within the Federal Reserve System that oversees open-market operations and makes monetary policy decisions.
The Federal Reserve Bank of New York president always sits on the Committee, and the other presidents serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of banks, one bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco.
All of the Reserve Bank presidents, even those who are not currently voting members of the FOMC, attend Committee meetings, participate in discussions, and contribute to the Committee’s assessment of the economy and policy options. The Committee meets eight times a year, approximately once every six weeks.
FOMC members (2014)
Janet L. Yellen, Board of Governors (official since Feb. 3, 2014)
William C. Dudley, New York, Vice Chairman
Richard W. Fisher, Dallas
Narayana Kocherlakota, Minneapolis
Sandra Pianalto, Cleveland
Charles I. Plosser, Philadelphia
Jerome H. Powell, Board of Governors
Sarah Bloom Raskin, Board of Governors
Jeremy C. Stein, Board of Governors
Daniel K. Tarullo, Board of Governors