Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

U.S. Interest Rates Federal Open Market Committee Meeting Preview

Interest-Rates / US Interest Rates Jan 22, 2011 - 04:17 AM GMT

By: Asha_Bangalore

Interest-Rates

Best Financial Markets Analysis ArticleThe Federal Open Market Committee (FOMC) meeting on January 25-26 is most likely to close without any change in Fed policy.  The FOMC will reaffirm its plan to complete the $600 billion purchase of Treasury securities.  The policy statement should contain modifications that would reflect the nature of latest economic reports.  The strength in recent retail sales data, the sluggish labor market, and ongoing challenges of the housing market will feature in the policy statement. 


The Fed's latest view on inflation will be noteworthy given the recent hike in energy and food prices and the 25 basis points increase in inflation expectations (see Chart 1) since the December 14 FOMC meeting. 

 

Mortgage rates have also moved up roughly 60bps from a low of 4.17% during November 2010 (see Chart 2). 

 

The FOMC noted its concern about the unemployment rate at the December meeting. The December employment report, published in January 2011, shows an elevated level of unemployment in the nation (9.4%).  There is a strong likelihood of the Fed retaining the view presented in the December 2010 policy statement.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

Going forward, an important consideration is the policy bias of new voting members of the FOMC.  At present, there is one vacancy in the Board of Governors of the Fed.  In 2010, President Hoenig of the Kansas City Fed dissented in each meeting and would have preferred a less accommodative stance; he is not a voting member in 2011.  Philadelphia Fed President Plosser and Dallas Fed President Fisher are new voting members in addition to Chicago Fed President Evans and Minneapolis Fed President Kocherlakota.  The FOMC will be weighing on important decisions in 2011 as the economy enters the expansion path of the business cycle.  The timing and magnitude of a monetary policy change will probably be the highlight of 2011.  Presidents Plosser and Fisher have presented a differing view from the majority of the FOMC in 2010.  President Plosser has consistently taken a hawkish stand and has stressed the price stability mandate of the Fed.  As recently as January 17, Plosser noted:

"If economic growth in the United States continues to gain traction and the prospects begin to look ever better, it might be time for us to begin thinking about how do we begin to gradually take our foot off the accelerator,"

"I do know that there is a danger that we wait too long, and the consequences of that might be disruptive and dangerous," he added.


President Fisher of the Dallas Fed, another new voting member who strongly favors the inflation mandate, commented as follows on January 12:

"Barring some unexpected shock to the economy or the financial system, I think we have reached our limit,"

"I would be very wary of further expanding our balance sheet."


President Evans of Chicago track record suggests that he is likely to vote with Chairman Bernanke.  President Kocherlakota is a new head of the Minneapolis Fed and starts his first voting term on the FOMC.  As of January 11, 2011, he indicated he is "comfortable" with the Fed's current policy stance. 

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules