Fed: No ‘taper’ todayby Keith Gumbinger
The Federal Reserve decided today to hold the line on purchases of Treasuries and Mortgage-Backed Securities. The Fed was seemingly not convinced at this moment that the economy is ready to run without the full benefit of $85 billion per month of purchases of bonds, its so-called Quantitative Easing program.
In the release which accompanied the close of their policy-setting meeting today, the Fed noted: “Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
With the Fed’s assessment of the economy on the softer side, interest and mortgage rates may have a little space to fall over the couple of weeks, provided the incoming economic data continues to be of mix-and-match variety. The next Federal Reserve meeting comes at the end of October, and it would be reasonable to expect that rates will firm up a little prior to the meeting as markets again adjust to what may be the start of the tapering, especially if the economic data starts to take on a warmer tone more consistently. However, if that October meeting also turns out to be a non-starter, we’re likely to repeat the cycle until the December 17-18 meeting comes along.