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Thoughts on the Fed (FOMC) Meeting

The FOMC wrapped up its two-day meeting by announcing that it will extend the Operation Twist program for the rest of the year.

The statement also said that “the committee [FOMC] is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

In other words Dr. Bernanke is on call.

Market reaction was mixed, including an initial sell off in stocks, though the S&P 500 did rebound closing at 1,355 down 0.17% for the day.    The initial sell off was probably an indication that a number of traders had tried to get ahead of a potential QE 3 announcement beginning as early as last week.

James Pethokoukis writing on the American Enterprise Institute blog The American discusses the fact that the Fed has lowered its Economic forecast for the remainder of 2012.

CNBC’s Bob Pisani on his Trader Talk Blog writes that “the Fed (laid) the ground work for more easing.”

Also of interest was commentary by Michael Claherty of RBC Capital Markets.   Speaking on a CNBC panel, Claherty noted that do to “sourcing problems” the Fed may have trouble extending Operation Twist through the end of the year, and that by September may extend the program to include mortgage backed bonds.

From an investment standpoint the message seems to be that QE 3 remains a possibility, but it is not going to happen without markets first enduring some additional pain and stress.

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DISCLAIMER: Nothing in this article should  be construed as a personal recommendation or investment advice.  Nor should anything in this article be construed as an offer, or a solicitation of an offer, to sell or buy any particular investment security.   Investors should conduct their own due diligence and seek the advice of a financial and/or investment  professional before making any investment decisions.

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