The Federal Reserve's FOMC Statement today led to large rallies in treasuries, foreign currencies and the stock market. Breaking down the statement in comparison to the previous Jan 28, 2009 statement shows the following:
- Target range for the federal funds rate remains at 0 to 1/4 percent and the wording regarding the duration of the low rates was unchanged at "an extended period of time."
- Inflation expectations were also unchanged with the FOMC expecting "inflation to remain subdued" and continuing to "see some risk that inflation could persist for a time below rates that best foster economic growth and price stability."
- The Committee's opinion on the economic recovery improved as they removed the following statement that appeared in January's statement from today's release, "the downside risks to that (economic) outlook are significant"
- Lastly, Bernanke & Co. pulled out the bazooka, helicopter, tank and all other monetary weapons of mass destruction with the statement about further increasing the Fed's balance sheet. The FOMC committed to purchase an additional $750 billion of agency mortgage-backed securities as well as an additional $100 billion agency debt and the big market mover of $300 billion of longer-term treasury securities over the next six months.
Today's announcement saw massive intraday reversals in the price of gold ($50+) and in the ten and thirty year treasury bonds (up 4+ and 5+ handles, respectively). The most interesting move is the large drop in the dollar index. This daily chart shows the index breaking down after a two week slide:
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