Fed Stands Pat for an Extended Period of Time

| 23 June 2010 14:31

The decision to leave rates on hold was an easy one for the Fed to make.  The Fed still anticipates this will be the case for an extended period.  The statement seemed to recognize some of the less favorable data since it met last. For example it dropped the phrase that said housing starts had edged up. It recognized that financial conditions were also less supportive, though it attributed this primarily to developments abroad.  Not unexpectedly, the Fed’s Hoenig continued to dissent from the guidance about the extended period.

The dollar and equities weakened in response.  The euro firmed back toward session highs and the dollar made new lows for the day against below JPY90. The 2-year note yield fell to the lowest of the year.

In general, these is little new in the statement and guidance.  FOMC meetings are not non-events, but there is no real surprises or new information in the FOMC statement.  We’ll have to wait for the minutes to learn more about the discussion of inflation, which the statement now characterized as trending lower rather than begin subdued.

avatar About Marc Chandler

Marc Chandler joined Brown Brothers Harriman in October 2005 as the global head of currency strategy. Previously he was the chief currency strategist for HSBC Bank USA and Mellon Bank. In addition to frequently providing insight into the developments of the day to newspapers and news wires, Chandler's essays have been published in the Financial Times, Barron's, Euromoney, Corporate Finance, and Foreign Affairs. Marc appears often on business television and is a regular guest on CNBC.

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