The Banking and Strategy Initiative

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Fed FOMC Statement – Pre QE withdrawal – July 31, 2013

Even as Janet Yellen moves closer to her goal, Larry Summers is not far behind as the insider making the claim to the Fed throne. Meanwhile the FOMC statement released brings out two part clause additions to the statement from June 19, noting that unfortunately ‘mortgage rates have risen somewhat’  from the events that followed May 21 and . The peremptory pending pronouncement on inflation which the doves on the FOMC have been pushing away fora long time also made through probably six months later than we would have noted it in the beginning of the year

The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.


The June 19 statement had stressed not to bother about “transitory influences” on the drop in inflation

Larry Summers of course has infact been more hawkish, having refused the stimulus expansion per se in the first days of the crisis and we hear he is featured in The Social Network too dishing the doozy to the rich Winklevosses . Yellen of course , from his days at the Frisco Fed , is more dovish and more a Community Banker even as Sarah Bloom Ruskin and the other lady  at the Fed retire in early 2014 just after Ben Bernanke (tbc) steps down. Yellen is among the first few who wanted derivatives to be regulated (Huff Po) and the then Frisco Guv was also on the side of those who saw a crisis breaking down earlier than most.

However, we will focus on the FOMC statement and not Sarah Bloom Raskin being offered in the Treasury as a due balancing . The changeover decision is likely after the Jackson Hole summit, where Ben Bernanke may not be attending.(Reuters Insider)

A 72-20 rich poor split as reported, is also not really a catalyst for that is much better than the conditions in Asia or other non OECD economies

The rest of the FOMC statement also affirms that the Fed will ”  take appropriate account of the likely efficacy ” in determining the size, pace and composition of asset purchases, nary a concern about rerating that employment condition pencilled into the contract as it remained aware of the higher structural unemployment post crisis. James Bullard in the meantime has changed his vote from last month, leaving just one naysayer as Esther George, who disagreed on the point apparently still bothered about the long run inflation impact of this stimulus

10 year yields were up to 2.64% after the announcement and equities are positing a slight positive takeaway from the meeting announcement

However the Fed has announced earlier in the May statement and the Senate witness thence that it is more or less agreed on the removal of the ineffective stimulus and the September meeting should be substantially kicking off the said “taper” though stimulus will likely remain longer basis the weak recovery as the Fed in its July 13 witness testimony had added the low interest rates as a third objective rather than reiterating what remains its “dual mandate” of controlling inflation and managing unemployment

The first Q2 GDP numbers came in at a healthy 1.7% up from 1.1% in Q1, a number continually revised downwards in three runs at it since May



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