WEDNESDAY SEPTEMBER 23, 2009

Fed Day. Calling all English Majors!

The Federal Reserve Bank’s Open Market Committee will conclude its two day meeting and will issue an announcement on its proceedings at 2:15 today. Normally, these announcements are eagerly awaited as the Fed provides direction on interest rates. This time, however, few people expect the Fed Funds rate to be changed from its current 0-.25% range.


However, the markets will parse over every word in the announcement looking for clues on monetary policy. We are in a unique time. There are more than interest rates to discuss. In its efforts to combat the economic crisis, the Fed has employed many security purchase programs that have not been utilized in the past. Since late last year, the Fed has been directly purchasing U.S. Treasury securities and mortgage-backed securities. The main impact of these programs is to lower interest rates and provide stimulus to the economy. Any language indicating that the Fed will begin to pull back or exit these programs will suggest that monetary tightening is coming, regardless of the Fed’s highly anticipated “no change in rates” announcement.

 

Of course, one will need an English degree to successfully interpret the arcane language of the Fed’s statement!

POSTED AT 1899-12-30 11:20:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

RECENT POSTS

Better Unemployment Number


The "Safety of Bonds" Myth


Just like that!


Ugly August


Bright Side of Double Dip Fears


All eyes on Wyoming


Lack of Business Confidence


Are bonds forecasting a double dip?


Are rates too high?


Slowdown?

The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.