FOMC Statement 9-23-09

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: BAC, GS, C, MS, WFC, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

The Federal Reserve released its Federal Open Market Committee (FOMC) Policy Statement this afternoon. The Fed's note offered no surprise, and massaged any and all market concern. Thus, the broader indexes moved slightly higher on the release, but still closed the day decidedly lower.

The Dow Jones Industrials Index dropped 0.83% on the day. In fact, stocks marked their worst day since the first of the month. We suspect some noteworthy sector strategist somewhere must have weighed in with some sort of concerning note...

FOMC Statement

The FOMC offered its opinion for a generally stabilizing economy, but one still weighed by high unemployment and light demand for financing. While indicating housing demand was improving, the Fed also declared it would continue to support low mortgage rates through its low rate policy, including the purchase of $1.25 trillion more of agency mortgage-backed securities through the end of Q1 2010. The action maintains liquidity in the housing market by allowing financial institutions to lend more freely. It also supports the balance sheets of financial institutions by helping to preserve the value of financial derivatives via synthetic demand. The Fed will also purchase $200 billion of other agency debt. Still, the economic caretakers were careful to note that these programs are winding down, and that they will come to an eventual and certain end. The FOMC reassures that the conclusion of financial aid programs are only possible thanks to a "pick up" in economic activity since the severe downturn.

The Fed also quelled inflation concerns, noting that "resource slack" is likely to continue to "dampen cost pressures." Where the Fed and its harshest critics differ though is on longer term inflation forecasts, where the Fed sees little trouble ahead... sort of like how it saw little risk of trouble spreading from the housing market to the broader economy before the economic demise that set in last year.


Please see our disclosures at the Wall Street Greek website and author bio pages found there.