FOMC--Rare Non-Event

In an unusual but not unexpected fashion, the last FOMC meeting was as much of a non-event as such a gathering ever is. The FOMC left policy unchanged. This includes not only interest rates of course, but also its asset purchase program and its communication policy.

The Fed did recognize that despite slowing global growth, the US economy continues to expanded moderately. The Fed did notice what we had in terms of business investment appears to be growing less rapidly.

The statement also recognized improvement in the labor market but noted that the unemployment rate remains high. Despite the somewhat disappointing retail sales report earlier, the statement acknowledged the expansion in household spending.

Earlier in the year there were chronic dissents from some of the more hawkish members, but at today's meeting like last month's, the dissent came from the dove Evans who favors more accommodation.

The next FOMC meeting is in late January. The Fed's staff will update forecasts and it is at that meeting that many expect the Fed to unveil it new communication method. The meeting will be followed by a press conference by Bernanke which will offer an opportunity to explain and clarify the intent of the new communication initiative.

There were some observers who had hoped/expected some more signals about another round of asset purchases. This was not forthcoming and the FOMC stuck to their boilerplate rhetoric that it is prepared to adjust the size of its asset purchase program "as appropriate".

We continue to believe the bar for a new round of asset purchases is high, requiring either a serious risk of recession or deflation.