Wednesday, December 12, 2012

It's The Economy Stupid: Fed Statement on Interest Rates

So basically, what the Fed is saying, if the unemployment rate stays above 6.5%, we could have 0.25% interest rates forever???




Wire: Bloomberg News (BN) Date: Dec 12 2012  11:30:06

Fed Boosts QE With $45 Billion in Monthly Treasury Purchases



By Joshua Zumbrun and Jeff Kearns

     Dec. 12 (Bloomberg) -- The Federal Reserve said it will buy

$45 billion a month of Treasury securities starting in January,

expanding its asset-purchase program, and it linked the outlook

for its main interest rate to unemployment and inflation.

     “The committee remains concerned that, without sufficient

policy accommodation, economic growth might not be strong enough

to generate sustained improvement in labor-market conditions,”

the Federal Open Market Committee said today at the conclusion

of a two-day meeting in Washington.

     The Fed said interest rates will stay low “at least as

long” as the unemployment rate remains above 6.5 percent and if

inflation “between one and two years ahead” is projected to be

no more than 2.5 percent. The committee “views these thresholds

as consistent with its earlier date-based guidance.”

     Chairman Ben S. Bernanke is using his unlimited authority

to buy Treasuries in an unprecedented effort to stoke growth and

reduce 7.7 percent unemployment. The Fed acted in its last

regular meeting of the year as lawmakers and the Obama

administration continue talks to avert more than $600 billion of

automatic spending cuts and tax increases that threaten to throw

the country into a recession.

     The buying announced today will be in addition to $40

billion a month of mortgage-debt purchases. The FOMC said asset

buying will continue “if the outlook for the labor market does

not improve substantially.”

     The latest move will follow the expiration at the end of

this year of Operation Twist, in which the central bank each

month has swapped about $45 billion in short-term Treasuries for

an equal amount of long-term debt. That program kept the total

size of the balance sheet unchanged, while the new purchases

will expand the Fed’s holdings.



John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721


Street Address:

445 North Blvd, 7th Floor

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One City Plaza, 7th Floor

Corner of North Blvd & 4th Street

Exit 1B I-110 Convention Street,

Turn Left to get to North Blvd,

Turn Right on North Blvd


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