The Banking and Strategy Initiative

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FOMC Policy speak and Forecasts, March 19-20, 2013 (followed by Ben Bernanke Speaks)


The March FOMC Statement has been released along expected lines. The Fed has apparently tried to remove possibility of runaway speculation around its statements in small measure removing strategic Ifs and buts from the January statement specifically when confirming that they will continue “ its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability.” Also the Fed notes the continuing uptick in employment and housing markets and the stability of inflation at 2% reiterated as is from the January  statement.

What is clear from the FOMC policy statement and will make for some long brackish back and forth at the presser is the Fed’s obvious acceptance of low rates into 2015 and the need from the Fed to dispel questions of any QE3 withdrawal committing again to the $85B per month in agency MBS and long dated Treasuries apart from reinvesting the principal from existing holdings. Though an unintended consequence of the same will be encouraging increasing yields on the long end of the curve after the statement.

Global uncertainty has also been cast aside as now it is more of a certainly that the outlook will be weak for long, and that also helps observers sign in to the Fed’s commitment to new monetaristic targets for maximum employment and price stability. In particular, the Fed statement takes note of the discontinuing government incentives in the housing market pointing to a more restrictive fiscal policy while noting progress in the housing market. Mortgage rates had been as all time lows with broadly engaging  Housing settlements and Refinance rates are expected to drop from the 76% share of mortgages in 2012


GDP projections have been toned down in the March forecasts in a bid to achieve a possible score within the forecasts without changing the trend up while e the performance of the unemployment rate has increased in the forecast improvements for 2013, 2014 and 2015 to 7.5%, 7% and 6.5% at the top of the range

The toned down GDP forecast finds commensurate decreases in PCE inflation forecasts as well to well below 2% in 2013 with Core PCE inflation limited to 1.6% in 2013



New upgraded forecasts from the Fed Districts in March 2013

New upgraded forecasts from the Fed Districts in March 2013





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