FOMC Meeting

Today's FOMC Meeting: Fed Votes Operation Twist to Continue

By , Contributing Writer, Money Morning -

Today's FOMC meeting - which started Tuesday - ended in a widely expected manner.

The Fed announced it will extend Operation Twist, which was set to expire at month's end, until the end of 2012, in an effort to keep interest rates low.

The Fed will expand Operation Twist, which replaces short-term bonds with longer-term debt, by $267 billion.

In a statement, the FOMC said the prolongation of Operation Twist "should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."

The Fed pointed to the U.S. economy's poor recovery as reason for more "twist."

"Growth in employment has slowed in recent months and the unemployment rate remains elevated," the Fed reported. "Household spending appears to be rising at a slower pace than earlier in the year."

The lack of more intense stimulus, namely a third round of quantitative easing, sent the Dow Jones, which had been flat all day, plummeting some 50 points in just seconds. All three major indexes treaded lower following the report. Gold, hoping for QE3, sold off some $25 an ounce.

The yield on the 10-year Treasury note rose to 1.67% just after 1 p.m. in New York from 1.62% late yesterday.

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FOMC Meeting: Will Ben Print?

By , Money Morning -

Most investors expect Federal Reserve Chairman Ben Bernanke to announce more stimulus when the FOMC meeting concludes tomorrow (Wednesday).

But what if he doesn't?

Money Morning Chief Investment Strategist Keith Fitz-Gerald joined Fox Business' "Varney & Co." Tuesday to discuss this outcome with host Stuart Varney.

"Keith, what happens if Ben doesn't print any money, makes no such announcement, and the Germans don't agree to let Europe print any money," asked Varney. "What happens?"

To hear what Keith said investors can expect from the Fed, and the market reaction, watch this video.
Keith also analyzed the Microsoft Corp. (Nasdaq: MSFT) announcement that it will release a tablet to compete with the Apple Inc. (Nasdaq: AAPL) iPad.

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Today's FOMC Meeting To Bring Little Change

By , Contributing Writer, Money Morning -

While the U.S. Federal Reserve will have an abundance to say about the economy today (Wednesday) when it concludes its two-day FOMC meeting, little is expected in the way of change.

The Federal Open Market Committee meeting will conclude Wednesday afternoon with a statement, revised forecasts and Chairman Ben Bernanke's news conference. The Fed will most likely reiterate that it will keep short-term interest rates at record-low levels through 2014. The Fed is not expected to commence any new program to lower longer-term rates unless the economy weakens.

That would diverge from the Fed's stance just three months ago when the January FOMC meeting ended with indications that Team Bernanke was leaning toward a third round of bond buying (QE3) to pump more cash into the troubled economy. More Fed bond purchases have been proposed as a means to drive down long-term rates to encourage borrowing and spending.

Since then, data on the U.S. economy has indicated a gradual strengthening, and the ongoing European sovereign debt crisis appears less ominous than it looked at the start of the year. Those developments argue against additional Fed bond buying.

"This will be a wait-and-watch meeting," David Jones, chief economist at DMJ Advisors, told the Associated Press. "Despite all the theatrics with a Bernanke press conference and new economic forecast, I think we will get a very predictable outcome-no change in policy."

That portends the Fed will retain its plans to keep its benchmark interest rate, the federal fund rate, at record lows until at least late 2014. The Fed planted that expectation at its January meeting and said nothing to change that hope when it met in March.

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What's Different About this Week's FOMC Meeting

By , Associate Editor, Money Morning -

The two-day Federal Open Market Committee (FOMC) meeting starting today (Tuesday) marks a historic shift in how the U.S. Federal Reserve communicates its policy decisions with the public. The changes center on disclosing individual FOMC members' interest-rate forecasts and economic projections. It may also release an agreed target for inflation. "It's a significant innovation," Jeremy […]

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The One Question We Must All Ask Ourselves

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

Rampant profiteering by Congress and greedy bankers is forcing us to weigh the slings and arrows of outrageous fortune against honesty and transparency - both of which are being trampled by crony capitalists in pursuit of the almighty dollar.

What's at stake is whether gross criminal activity and reckless disregard for the public will continue to be whitewashed by regulators like the Securities and Exchange Commission (SEC), the U.S. Federal Reserve, courts, and Congress, which encourage half-baked civil fraud charges followed by non-prosecution agreements and nickel-and-dime fines.

And even more galling, guilty parties end up neither admitting nor denying wrongdoing.

Let's face it, we have allowed the SEC, the Fed, and Congress to be corralled as a matter of regulatory and legislative capture by the very crooks they are responsible for policing and protecting us from.

We are lying to ourselves if we do not believe that we are all part of this problem. It's not that most of us aren't honest. It's that we venerate money and wealth too much.

Rather than being disgusted by dishonest manipulators, liars and cheats, we excuse the less-than-obvious perpetrators as if their example of cutting corners to get ahead, as far ahead as possible, might clear a path for some of our own pursuits.

What have we become? Are we a nation of people with liberty and justice for all, or just a bunch of money grabbers stepping on each other's liberties to pursue self-centered happiness by becoming filthy rich?

Don't get me wrong. There's nothing wrong with the profit motive driving business. And there's nothing wrong with working hard and trying to make a lot of money. Those are honorable pursuits.

President Calvin Coolidge said: "The chief business of the American people is business."

But in the same speech made on January 17, 1925 our 30th president went on to say: "Of course the accumulation of wealth cannot be justified as the chief end of existence."

Tragically, the fountainhead of greed in America emanates from our own Congress. It has become obvious that the accumulation of personal wealth is their primary civic duty.



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Out of Answers, Federal Reserve Can Only Offer Empty Rhetoric

By , Associate Editor, Money Morning • @DavidGZeiler -

The Federal Open Market Committee (FOMC) is scheduled to issue a statement at 2:15 pm. today (Tuesday), but don't expect anything other than more empty rhetoric.

Indeed, with few options remaining, the Fed is expected to produce little more than a statement designed to reassure the markets following today's meeting.

"If the Fed were smart, they would use this meeting to take decisive action," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "Sadly, though, I think they'll lay low and issue yet more hollow statements filled with information that at this point constitutes less than fluff."

At this point, few bullets remain in the Fed's chamber; interest rates have been near-zero for almost three years, and two programs of "quantitative easing" over the past two years have pumped $2.3 trillion into the U.S. economy.

In an attempt to show it was doing something to help the economy, the central bank said last summer that it would maintain rates at that level until mid-2013.

And while the Federal Reserve is not expected to announce immediate plans for more quantitative easing - QE3 - many believe some sort of accommodation, probably directed at the housing market, is coming next year.

"There is a 75% chance the Fed will buy mortgage-backed securities in the first half of the year, possibly by January," Lou Crandall, chief economist at Wrightson ICAP LLC, told MarketWatch.

A series of relatively positive economic reports in recent weeks - unemployment recently dropped to 8.6%, while consumer spending and manufacturing have edged upward - has eased the pressure on the Fed to take any more action this year.

As part of its strategy to maintain optimism in the markets, the FOMC will likely promise to pump more money into the U.S. economy at some point next year.

"The numbers are getting better, but not enough to keep [the FOMC] complacent," Crandalltold MarketWatch.

Word Games

Recognizing that its options are limited, the Federal Reserve instead will focus today on the one thing it can provide in near-limitless supply - words. Today's meeting is expected to focus on a new communications strategy that will offer more details on the Fed's goals for inflation and unemployment - its dual mandate - and how it plans to meet them.



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Jim Rogers: "The Fed is Lying to Us"

By , Associate Editor, Money Morning • @DavidGZeiler -

Despite statements to the contrary, the U.S. Federal Reserve has continued to pump money into the economy, says investing legend Jim Rogers.

The resulting low interest rates and creeping inflation, he says, are destroying the wealth of millions.

"[Federal Reserve Chairman Ben] Bernanke said last August he was keeping interest rates artificially low," Rogers told Yahoo! Financeon Tuesday. "The only way you can do that is to go into the market."

As proof, Rogers pointed to the rise in the broad M2 measure of the U.S. money supply, which has increased more than 5% since the Fed's second quantitative easing program (QE2) ended on June 30, and 20% since November 2008.

"Since August - well, this whole year - the M2 has jumped up," Rogers said. "They're in the market. They're lying to us."

A well-known critic of the Fed who has called for it to be abolished, Rogers warned that the central bank's policies would lead to disaster.

"Right now what the Federal Reserve is doing is ruining an entire class of people in America," Rogers said. "The people who saved and invested for the past 10, 20, 30 years are now being ruined because interest rates are [too] low."

He added that if he were Fed chairman, he'd raise interest rates to slow down inflation.

In a separate interview with The Streetyesterday (Wednesday), Rogers said he considered the Fed to be the greatest risk to the U.S. economy in 2012.

"They don't seem to understand economics or finance or currencies or much of anything else except printing money," Rogers said.

Painful Remedies

The other major concern that Rogers has is the soaring federal debt, which recently passed $15 trillion.

"We are the largest debtor nation in the history of the world and the debts are going higher and higher by trillions, every two or three years," Rogers said. "We're all paying the price for it. And wait till 2013 - we're really going to pay the price."



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Fed Preview: Today's FOMC Meeting Will Prove That Team Bernanke is Out of Ideas

By , Associate Editor, Money Morning -

If you're handicapping the U.S. Federal Reserve's two-day Federal Open Market Committee (FOMC) meeting that concludes today (Wednesday), you can make the following two predictions - and you'll almost certainly be right:

  • U.S. Federal Reserve Chairman Ben S. Bernanke will announce some form of economic stimulus.
  • But the short-term benefits will be small, and any long-term benefits won't be enough to help out-of-work Americans or jump-start the wheezing U.S. economy.
"I do think the Fed will intervene," Money Morning Chief Investment Strategist Keith Fitz-Gerald said in an interview. "But I don't believe for a second that the central bank's intervention will help the U.S. economy."

Troubling Trends

If anything, the nation's economy looks worse today than it did on Aug. 9, which is when central-bank policymakers last met. The "official" unemployment rate remains at an alarming 9.1% - with no jobs added in August - and true joblessness may range from 17% to 23%. Housing starts declined last month by the greatest amount since April. And the International Monetary Fund (IMF) just downgraded its U.S. growth forecast to 1.5% from 2.5% [To see related story in today's issue, please click here].

The spreading European sovereign debt crisis continues to whipsaw stocks, oil prices and gold. And several dramatic single-day plunges - in stocks and in gold - spooked investors for days after the event.

Bernanke feels pressure to act, but the odds that Federal Reserve policy can make a meaningful splash are low indeed, Money Morning's Fitz-Gerald says.

What to Expect From Today's FOMC Meeting

Since the Fed's actions have so far done little to ignite economic growth, investor expectations were muted ahead of today's FOMC meeting conclusion.

"It looks like the market is baking in an announcement of some kind of quantitative-easing strategy," Deirdre Dennehy, portfolio manager at Rockland Trust, said in an interview. "[But] for them to announce a QE3, I'm not sure how impactful that's going to be. The more times they do that, the less the effect in the market."

Analysts expect the Fed will attack longer-term rates by adjusting its $1.7 trillion portfolio of U.S. Treasury securities.

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What to Expect from this Week's FOMC Meeting

By , Associate Editor, Money Morning -

The next Federal Open Market Committee (FOMC) meeting starts tomorrow (Tuesday), and investors expect Fed Chairman Ben Bernanke to announce some form of stimulus measures for the U.S. economy. Investors anticipate the Fed to announce at Wednesday's conclusion new efforts to reduce long-term interest rates to allow for cheaper borrowing as well as to increase […]

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Three Moves to Make Before the Next FOMC Meeting

By , Chief Investment Strategist, Money Map Report -

The decisions made at the next Federal Open Market Committee (FOMC) meeting on Sept. 20-21 could affect market performance for years to come.

That's why investors should prepare ahead of time.

Of course, there's no way to predict exactly what U.S. Federal Reserve Chairman Ben S. Bernanke will do, but 20 years of experience in global markets suggest he's considering five alternatives drawn from a rapidly diminishing menu of options:

  • Eliminate interest paid on reserves.
  • Sell short-term securities while buying longer-term debt.
  • Target actual inflation.
  • Buy more assets outright in a program that would be somewhat like the $600 billion worth of Treasuries it bought as part of QE2.
  • And, finally, it could just do nothing.
That being said, I have a pretty good idea which one of these options Bernanke will choose. But more importantly, I can tell you three moves you can make now to safeguard your investments ahead of time.

Let's look at the Fed's options first.

Option #1

First, the Fed could eliminate interest paid on reserves. Banks would hate this, but it would go a long way towards encouraging lending.

Banks right now are borrowing at extremely low rates, building up huge cash stockpiles and investing the spread. By doing this, the banks are earning more than they would from even their best customers at a fraction of the risk.

Customers have become almost irrelevant as a result, which is something our leaders cannot seem to grasp. So while they're ostensibly all about helping Main Street, they're really just selling out to Wall Street.

We have to get the money to the consumer where it can be used to create wealth.

Option #2

The second solution is to sell short-term securities while buying longer-term debt. You may recall that the Fed did this in 1961 as part of something they called "Operation Twist."



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