We just received the official October FOMC Statement and here is a quick look at the changes from the September release…
Very little tweak to the upside with the acknowledgement of better household spending. However, no concerns on inflation or future inflationary pressures whatsoever, which is somewhat of risk appetite positive in my opinion.
No changes in this paragraph, which adds more positiveness to the market as the Feds still remain pessimistic over the future, thus the continuation of QE3.
No change to QE3 and Operation Twist… Same as the last statement.
No changes to the forward guidance until mid-2015. No changes to the “we are watching you, economy” approach.
Same guy Lacker voting against both forward guidance AND QE3. Seems he is the only one. Overall not a surprise.
How to interpret FOMC Statement?
Seems to me that the market is going to rally because of the fact that the Feds totally ignored the surprise dip in the September Unemployment Rate to 7.8%; judging from this statement, we are seeing the FOMC is totally unchanged in their views of the economy, thus the likelihood for an early ending of QE3 is not high, despite of the positive data we’ve received lately. Considering also that the Feds are relatively comfortable with the current inflation, as noted in the first paragraph, I believe the market should have no concerns whatsoever.
All in all this is a pro risk appetite report. Market is once again reminded why the Feds launched QE3, and we should see further strengthening of the EUR following this report.
October FOMC Statement Analysis
October 24, 2012 by Leave a Comment