Wednesday, November 04, 2009

The Fed hopes that eventually there will be a turn-around:

From today's statement:
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
They kind of sugar-coat it with two of the three reasons for the low rate being inflation ("trends" and "expectations").

It's good for the banks, but there is nothing much the Fed can do in a post-credit-bust environment short of spending money (which it has via Quantitative Easing) but that option is about to run out.

So here we are, basically at zero percent. It's not a position of strength.


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