Aug 132009
Fed Interest Rate Path: More of the Same at the August Meeting
- The Federal Open Market Committee (FOMC) decided at its August meeting to keep its rate targets and most of its credit easing programs unchanged “for an extended period”. The Fed will slow purchases of Treasuries and extend purchases until the end of October 2009 but did not expand the program.
- Some analysts speculate the FOMC may later expand quantitative easing, particularly TALF purchases of private sector assets. An expansion of Treasury purchases is unlikely given recent economic improvement. Contrary to market expectations, many believe the Fed is unlikely to begin rate normalization until 2010 or 2011 due to a persistent output gap and stubbornly tight credit.
