As we all know, the FED held rates at the FOMC meeting and left the “extended period” phrase in and will maintain QE2 through its duration. Two weeks ago Jon Hilsenrath opined that the FED would likely remove the “extended period” language but that proved another opinion without material support. Many analysts felt that the March 15 FOMC statement was more hawkish than previous statements but I struggle to see how that is in fact the case. Yes, the FED did say the economy is on “firmer footing and overall conditions in the labor market appear to be improving gradually.” There were a few references to inflation but that hardly makes for a hawkish outlook.
Archive for the ‘FOMC’ Category
Notes From Underground: WHO IS GUENTHER OETTINGER???
March 16, 2011Notes From Underground: The FOMC statement points the all-FED criticism back at CONGRESS
December 14, 2010Paragraphs two and three of the FOMC statement remind all concerned that the FED has a dual mandate. In fulfilling that statutory mandate, the FED is using all tools at its disposal to fulfill that mandate. Paragraph two said, “Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.” Then in paragraph three it said: “To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate….”
Notes From Underground: Swiss go CucKOO for COCOs
December 13, 2010Something to put on your radar screens for the new year: contingent capital, or CoCo bonds. These instruments are contingent convertible and will be a very respected form of TIER 1 capital under the foggy regulations of Basel 3. The regulators like these instruments as they are DEBT that converts to equity if/when the bank-in-question’s equity/capital ratio falls below a certain level. Rather than the BOND holders getting a free ride and the equity owners bearing the burden with an equity raise, the CoCos will automatically convert to EQUITY, which will lower the level of DEBT and increase equity capital to a regulatory acceptable level. Credit Suisse announced it’s going to do a $30 billion CoCo so you can be certain that other large multinational banks will be joining in. It has yet to be determined what effect CoCos will have on the markets overall. If its popularity catches on, as I suspect, it could provide a boost to the global behemoths as it would lower the need to float more stock to reach the needed capital levels.
Notes From Underground: PIIGS Fly?
October 12, 2010We’re coming above ground until next Thursday. We want to see if PIIGS fly. In the meantime, we will be airing some of our greatest hits. Notes From Underground: The FED has created a ball of confusion (Aug. 6)
Notes From Underground: NBER plays TOMMY; BENNY turns on the monetary jets
September 21, 2010In what must be the results of being rendered deaf and dumb by the credit implosion of the last 36 months, the National Bureau of Economic Research has declared that the recession has ended. It must be great to be an employed economist. In what world do these analysts live and the bigger question is why does it matter what they declare?
Notes From Underground: FED decides tomorrow and the envelope please …
September 20, 2010Another FED meeting and another day when the parsers of FED SPEAK get to dissect the nuances that the media uses to fill the void of that vapid wasteland. The current rally in the EQUITY markets will give the FED Board of Governors the needed cover to maintain the extended period language and appear that it is above politics.
Notes From Underground: The FED has created a ball of confusion
August 11, 2010The FED set the markets into a state of confusion. Just after the release of the FOMC statement, the markets reacted. The DOLLAR sold off and the equity markets are bouncing and trying to get to “GRACELAND.” Upon further review the markets have realized that more than offering up easy money as the solution, the fact that the FED has made a 180 degree turn in four short months has the markets very nervous. Markets hate uncertainty and the FED‘s policy of maintaining the huge liquidity instead of removing the monetary stimulus is making them nervous.
Notes From Underground: Waiting for the 12 gnomes of the FED
August 10, 2010Overnight, the Bank of Japan announced that it was holding rates at zero. The recovery was proceeding but the BOJ was watching the impact of the YEN on growth going forward. But at this point BOJ Governor Shirakawa was content to leave the YEN price to market forces. According to a Bloomberg article, Shirakaw did say that the PRESENT VALUE OF THE YEN did dominate the meeting because of possible risks to the economy. Most of the time, members from the Ministry of Finance (MOF) are invited to sit in the meetings with no vocal presence unless specifically asked. Finance Minister Yoshi Noda has been very vociferous about the YEN appreciation and it effects on Japanese exporters.
Notes From Underground: FOMC minutes raise concerns about deflation
July 15, 2010Yesterday’s release of the FOMC minutes seriously called to question the potential onset of deflation and it is causing the battle lines to be drawn. There is no question that the FEDERAL RESERVE BOARD is in the throes of a battle between those who remember 1937 and those who are more prone to favor some cleansing of the financial system by bearing the costs of too much debt. Thomas Hoenig, Jeffrey Lacker and others are worried that the FED has stayed too loose for too long and are merely going to recreate the atmosphere that was responsible for the current crisis. Bernanke, Rosengren, Kohn and others are output gap-oriented and remember the pain of stimulus removal before growth has gained traction. This is where we are in real time and the FOMC minutes reflect that the FED CHAIRMAN has and will prevail. Since Bernanke is an academic, he gives open debate a place in his FED–unlike the autocratic Greenspan. But debate is not outcome and while the media gets to fill time and space, the FED’s most recent minutes has illustrated a clear path.