Ben Bernanke has spoken. The statement from the two-day Federal Open Market Committee voted in an 11-1 to keep Fed Funds unchanged. Most importantly, the Fed is extending Operation Twist through the end of this year rather than letting this expire this summer. The FOMC is leaving its language that the exceptionally low rates will remain through the end of 2014.
The Fed will also continue to reinvest its agency and mortgage-backed securities principal and Bernanke maintains that the Fed is prepared to take further actions if the situation calls for it.
On the broad economy, the Fed thinks that housing remains depressed and spending is rising less. Inflation has declined and long-term expectations remain for low inflation. Most important is the expectation for modest growth the expectation is that unemployment will only decline slowly.
Stocks have softened after the news as S&P 500 is down about 10 points and the DJIA is down about 80 points.
JON C. OGG
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