WEDNESDAY NOVEMBER 4, 2009

Defining "Extended"

The market is anxiously awaiting the Federal Reserve Bank's statement following its FOMC meeting.  Much of the debate will surround any change in the use of the word "extended."  In the last statement, the Fed announced that Fed policy would remain accommodative "for an extended period of time."  Since, then, the economy has continued to show signs of improvement while the dollar has depreciated.  This has led may market pundits to call for the Fed to articulate an an exit strategy, even to raise rates to protect the dollar.  At a minimum, the market will be looking for a clearer definition of "extended."

Further complicating the Fed's policy are the results of last night's election.  With the Republican victories in Virginia and New Jersey governor races, the voters have sent a signal that the free spending policies at the state and federal levels are being frowned upon.  Importantly, the election results probably eliminate any chance of a second stimulus plan.  And this makes any Fed decision on monetary policy more complicated, as monetary stimulus becomes more important.

Get your dictionary out and let the word smithing begin! 

POSTED AT 1899-12-30 12:51:00.0

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.

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