Ben the Bartender is working the after hours party as the Fed will keep rates at “exceptionally low levels…for an extended period.” Also with respect to inflation, the commentary is identical to the Sept 23rd meeting which is highly dovish, this even as gold is at a record high, the CRB index is up 8% and the implied inflation rate in the 10 yr TIPS is up almost 30 bps. The 1st paragraph on the economy is very similar to the Sept 23rd meeting but they referred to household spending as “expanding” from “stabilizing” in Sept. The FOMC said they will buy $175b of agency paper in total from $200b previously. Bottom line, the Fed seems solely focused on keeping the yield curve as steep as possible in order to further recapitalize the banking system and also to boost the housing market by trying to keep mortgage rates low. They don’t care about the US$ and thus don’t care about inflation. DOVISH is the word of the day!
Looking out to the April 2010 FOMC meeting, the very dovish Fed statement has reduced the odds of a 25 bps rate hike to 40% from 54% priced in just prior.