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QE Dashboard Lengthened low rates pledge added onto maturity extension program The maturity extension program moderately flattened the yield curve and lowered key mortgage spreads since its inception, but little movement in real estate credit outstanding as a result. The Fed continues to focus on housing. The new pledge and the continuation of the maturity extension program will further lower interest rate volatility, with uncertain effects on housing Reenacted liquidity swap programs eased

FXstreet.com: Fundamental: Reports on Interest Rates
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As expected the FOMC announced it is keeping its target rate unchanged but now see that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.  There wereno other hints at new initiatives. As expected, there were no hints of QE3. However, the Fed has decided to be clear about the inflation part of its dual mandate by stating in a second press release that 2% inflation is most consistent over the long runwith its statutory

FXstreet.com: Fundamental: Reports on Interest Rates
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Highly Accommodative Stance Statement, projections suggest first rate hike in early 2014Q4 Balance sheet to remain constant until 2015 unless risk scenarios emerge Higher probablilty of asset purchases that will likely focus on mortgages FOMC unveils statement of long-term policy goals, new forecasts for target rate The Federal Reserve’s statement and press conference today revealed that the Federal Open Market Committee (FOMC) believes that the target Fed Funds rate will remain at or below 1%

FXstreet.com: Fundamental: Reports on Interest Rates
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 After a 2-day policy meeting, the Federal Reserve decided to maintain the target range for the federal funds rate at 0 to 1/4 percent and said it now expects that economic conditions "are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014", even longer than previously indicated. Ahead of the interest rates projections release for first time, the Fed shifted its approach as it had been saying that low rates will remain low until mid-2013 since

FXstreet.com: Fundamental: Reports on Interest Rates
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FOMC Meeting Preview: January 24-25 Many incomplete tasks to reactualize in 2012 Recurrent attempts to fix the link between monetary policy and housing Conflicting employment, inflation indicators bow to change of members A more nuanced communications policy to further nudge expectations What to Expect from the Federal Reserve this Week The forthcoming meeting of the Federal Reserve is a staging ground for policy initiatives that will last through 2012 and into 2013. In the coming months, the

FXstreet.com: Fundamental: Reports on Interest Rates
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The Bank of Canada left interest rates unchanged at 1% as expected and kept its guidance unchanged. The BoC also gave a preamble of its Monetary Policy Report due tomorrow. Governor Carney’s views is that the outlook for the global economy has deteriorated (due to the European sovereign debt crisis) since its October forecasts. While acknowledging that the US economy has been stronger than expected, the BoC still thinks that growth there will moderate going forward. That said, the European

FXstreet.com: Fundamental: Reports on Interest Rates
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Federal Reserve Balance Sheet Balance sheet reflects mortgage objectives of white paper To begin the year, the Fed released a brief outlining the economic challenges facing the housing market. As was communicated in previous Fed releases and implicit in the objectives set forth in the maturity extension program, they are still focusing on mortgage rates— through yield curve adjustments— and mortgage-backed securities (MBS) markets. Consistent with the ideas set forth in the white paper,

FXstreet.com: Fundamental: Reports on Interest Rates
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The ECB kept the leading interest rate unchanged at 1% as expected. The decision was unanimous. No signals were given with regard to cutting rates further in coming months. Mario Draghi sees recent signs of economic stabilisation at low levels but also emphasised the substantial downside risk to the euro area economy. We continue to expect the ECB to keep rates on hold for a prolonged period of time – possibly until 2014 – as the economy slowly improves but risks are skewed to the downside.

FXstreet.com: Fundamental: Reports on Interest Rates
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Buoyant UK data - December spending strong UK numbers have been quite good recently, much better than expected by most. Data yesterday showed BRC’s like-for-like sales climbed 2.2% in December, the best since April, and the RICS house price balance increased to -16%, the best since July 2010. Consumer spending was quite strong in December, which makes the weaker November more tolerable. Last week, manufacturing and service PMIs both surprised on the upside, the latter even sending a clear

FXstreet.com: Fundamental: Reports on Interest Rates
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The Federal Reserve’s Open Market Committee changes dramatically in 2012. Gone are Evans (the most dovish member of the FOMC), Fisher, Plosser and Kocherlakota (the Trio of hawks) and in comes Lacker, Pianalto, Lockhart and Williams. Three hawks and one dove will now be replaced with three doves and one hawk. We can only imagine what this means for monetary policy in the coming year. Every piece of good data will be looked at with skepticism and the central bank as a whole will be more

FXstreet.com: Fundamental: Reports on Interest Rates
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The New Year has begun and it is important to see what the market is pricing in for central banks this year. As you may know, central bank rate hike expectations change often but as of last week, most central banks are expected to keep monetary policy unchanged in the coming year but one is expected to ease aggressively. Find out who below! Federal Reserve - No Changes in 2012 European Central Bank - Possible 25bp Cut before Year End Bank of England - No Changes in 2012 Bank of Canada - No

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FOMC Minutes: December 13 New Developments in Communication Fed to release forecasts of target rate, timing of first rate hike in January Economic outlook unchanged, FOMC views recovery as fragile Participants still working on how to transmit long-term policy goals Minutes reveal discussion of labor market indicators, communication policy Today’s release of the minutes revealed few changes in terms of the Federal Reserve’s economic outlook, but suggested important changes to the Federal

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No new communication strategies unveiled, likely to revist issue in January Existing reinvestment and maturity lenghtening programs continued International financial conditions present significant downside risks The Federal Reserve today kept the target interest rate steady at 0.0% to 0.25% and maintained its existing policy of lengthening the average maturity of its system open market account portfolio. The FOMC also continued its policy of reinvesting principal into mortgage based

FXstreet.com: Fundamental: Reports on Interest Rates
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Federal Reserve Balance Sheet Lifeline to Europe does not disrupt Operation Twist Last week the Fed announced that it would reduce the cost of dollar liquidity swap agreements, with a select group of central banks by 50bp. The move is an international monetary policy response to the European sovereign debt crisis and the subsequent spillover onto large European banks’ balance sheet. However, the move, thus far, has not influenced domestic monetary policy objectives. For example, the slope of

FXstreet.com: Fundamental: Reports on Interest Rates
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To no surprise, the Bank of Canada lef the overnight rate unchanged at 1%. While acknowledging that uncertainty has increased regarding the global economic outlook, and that the recession is Europe is expected to be deeperthan the BoC had anticipated back in October, the Bank left the final paragraph of the statement unchanged. It continues to see  "the financial system functioning well and considerable monetary policy stimulus" in place. The fact that the US economy has performed better

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FOMC Minutes: November 22 Communication, forecast uncertainty, and risks FOMC mulls options for relaying views of policy stance to the public Minutes now providing more measures of uncertainty, risk evaluation Today’s release does not add much to the statement or press conference Staff provides analysis of nominal GDP and price-level targeting The text of today’s FOMC minutes suggest the Fed is considering new communications tools, but this process of consideration will likely continue into

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Federal Reserve Balance Sheet Balance sheet constant as FOMC meeting approaches The ebbs and flows of the Fed balance sheet continued this week as short-duration treasuries’ volatility persisted alongside an increase in longer-term security holdings. For example, treasuries maturing in greater than 10yrs increased 3.4%WoW, while 15day increased 51.4% and 90-day treasuries decreased 45.9%. Mortgage-backed securities (MBS), on the other hand, which are a focus of the maturity extension program

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FOMC Statement: November 2 Discussion gravitating towards more stimulus Bernanke sees no need for a nominal GDP target at present MBS purchases are a “viable option� and likely to act in 2012Q1 Fed to provide new communication strategy in December FOMC members downgrade their growth forecast for 2012-2013 Today’s press conference revealed more insight into monetary policy than today’s statement. The statement today repeated many of the themes from the previous FOMC meeting, but with a dissent

FXstreet.com: Fundamental: Reports on Interest Rates
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Federal Reserve Balance Sheet Operation Un-Twist? With all the excitement surrounding the Fed’s attempt to stimulate the economy by increasing the average maturity of its holdings, the Fed’s 15-day treasury holdings increased 65.1% WoW. Given that SOMA’s mandate now includes maintaining short-term interest rates within the implicit 0-0.25% target while also pushing down on long-term interest rates, the WoW increase is not without cause. In terms of long-term holdings, the Fed continues to

FXstreet.com: Fundamental: Reports on Interest Rates
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FOMC Minutes: October 12 Committee focuses on options and effectiveness Several participants view the transition mechanism as “attenuated� FOMC considering how best to use more forward policy guidance Many members think costs of lower IOER outweigh benefits Debate over cyclical and structural influences on labor markets continues With regard to economic conditions, the FOMC today made clear in the minutes the following trends: the pace of growth in the following quarters will only marginally

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Federal Reserve Balance Sheet Let’s Do the “Twist� On Monday, the System Open Market (SOMA) operations began its maturity shift with the first official purchase and sale under the amended fed balance sheet policy dubbed “Operation Twist�. The sale comes 15 days after the Fed announced it would adjust its portfolio position, extending the portfolio average maturity while also introducing a policy of principal reinvestment from maturing securities into agency mortgage backed securities (MBS).

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FOMC Statement: Sept 20-21 Operation Drop-Kick Begins Fed to move $400bn from short-term to long-term Treasuries by 2012Q2 Principal reinvestment shifted to agency securities from Treasuries Program is aimed squarely at reversing a depressed housing sector Three dissents continue as Fed unveils new program for stimulus The statement by the Federal Reserve acknowledged slow economic growth and significant downside risks to the outlook. At the same time, inflation is expected to be at or below

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Monetary Policy Tweaks Loom Balance sheet dynamics will become a central focus as the Fed explores further accommodation. Chairman Bernanke’s speech at the Jackson Hole conference and the August FOMC minutes suggest the Fed could influence market liquidity by increasing it $2.6Tr SOMA portfolio, adjusting its term composition, shifting the portfolio’s short-term holdings to longer-maturing securities, or by adjusting interest on excess reserves. In terms of the most current report, it appears

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FOMC Minutes: August 30 Bias towards action growing FOMC reduces its outlook for growth Many participants view downside risks to growth as having increased Forward guidance usage represents a measured response to deterioration September’s meeting to focus on selection and effectiveness of policy tools The release of the FOMC minutes today described a deteriorating recovery in the US that has increased already high forecast uncertainty. The Federal Reserve notably lowered their forecasts for

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Jackson Hole Speech: August 26 The pace of the recovery has proven “disappointingâ€� so far Fiscal policy reform is needed to support long-run growth Next meeting extended to fully discuss additional stimulus Bernanke Portrays Positive View of the US’s Fundamental Qualities Today Federal Reserve Chairman Ben Bernanke delivered a largely safe speech outlining the  important reforms that must take place to ensure a strong long-term US growth potential in the  future. The Chairman did not

FXstreet.com: Fundamental: Reports on Interest Rates
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Banks’ reserves buildup enters a wait and see mode Excess reserves started the year at torrent pace, but declined 1.6% in the previous report and 0.4% in the current period, which suggests opposing market forces. On the one hand, the winding down of QE2 will slightly decrease market liquidity therefore making it less likely for depository institutions to increase their historically high excess reserves holdings. Conversely, current market volatility generally coincides with a flight to

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FOMC Statement: August 9 Transitory factors no longer to blame FOMC says exceptionally low levels for fed funds rate until mid-2013 Fed downgrades its forecast for economic activity and sees inflation at bay No third round of quantitative easing Three FOMC members dissent Prior to today's FOMC statement, the US Suffered through a rancorous debt ceiling debate, a major revision to GDP by the BEA, a downgrade of the US credit rating, continuing European sovereign debt issues, and yet another

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Federal Reserve Balance Sheet Balance sheet reflects limited principal reinvestment The Fed continues to purge securities acquired during the second Large Scale Asset Purchase program, with a ubiquitous drop in supply factors, excluding government securities. Although the drop in factors supplying funds was diminutive, with an average decline of 0.3%. The small net effect is consistent with a wind down in Fed activity and with limited principal reinvestment. In addition, Fed liabilities

FXstreet.com: Fundamental: Reports on Interest Rates
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Federal Reserve Balance Sheet The Fed’s near-term objectives evident in balance sheet Excess reserves returned to their rapid expansion as in previous weeks, increasing 4.3% since June 30th. The increase is likely to continue until the Fed enacts a policy change. The Fed outlined its eventual exit strategy, in both the FOMC minutes and congressional testimony at the financial services committee, which may include alterations to interest payments on excess reserves and other forms of balance

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FOMC Minutes: June 21-22 No Longer a Theoretical Exercise Uncertainty over the labor market creates imprecision over the NAIRU and is creating a quandary for the FOMC normalization policy Transitory influences on growth must dissipate before definitive decision The Fed takes a line on agency securities sales, but not Treasury securities sales Today’s release of the minutes revealed a more formalized sequencing of the exit strategy or the normalization of the balance sheet and accommodative

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Federal Reserve Balance Sheet LSAP Ends, but Balance Sheet Scrutiny will Continue Today marks the end of the Fed’s Large Scale Asset Purchases (LSAP) plan that targeted purchases of $600bn in government securities. Since the announcement in November, the Fed balance sheet has undergone a significant facelift. At the close of LSAP, the Fed holds $911bn in mortgage-backed securities (MBS), $12.9bn in TALF loans, and $118bn in agency securities. However, these crisisrelated holdings have declined

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LSAP Scorecard: Week 32 So long, goodbye, and thanks for all the liquidity If investors fear deflation, LSAP is a triumph, but if they fear unemployment, LSAP is a failure: core and headline inflation are farther from zero, but labor market indicators remain distressed From the Fed’s perspective LSAP was a success as it diverted the economy away from deflation and the irrelevance of interest rates Confidence has increased in the form of growing retail sales, lower volatility and ameliorated

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FOMC Statement: June 22 Sleeping with one eye open FOMC lowers growth estimates, still expects transitory inflation increase Bernanke said more data is needed to assess recent weak indicators FOMC will wait for definitive proof that recovery is sustainable before exit Today’s statement implies no major changes to current policy stance The Federal Reserve today released a statement describing the economy as displaying moderate growth, but at a pace somewhat more slowly than previously expected

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Federal Reserve Balance Sheet Excess reserves grow at breakneck speed Rampant growth of excess reserved continued over the past two months. Total adjusted excess reserves at depository institutions increased $177bn since 4 May and are up $600bn since the beginning of the year. At its present rate, excess reserves will be double that of its year-end level by October 2011. This pace of growth and the aggregate size of excess reserves will represent a severe challenge to the Federal Reserves’

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Federal Reserve Balance Sheet Excess reserves resume strong growth Growth of excess reserves increased sharply over the past few weeks as adjusted excess reserves of depository institutions engorged by $115bn since 4 May. Holdings of mortgage-backed securities declined $74.2bn or around $14.8bn per month since the start of the year. Holdings of government securities have increased by $506bn since the start of the year and $682bn since the commencement of large scale asset purchases on 10

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LSAP Scorecard: Week 28 Mixed signals across different market indicators Fed funds futures decline on reaction to slow progress in industrial production and capacity utilization, while volatility indicators remain low Commodities indices stabilize after a correction, while headline nonseasonally- adjusted inflation index perks upwards from past commodity spike. Pass-through from the previous spike to core inflation remains limited. Slow progress in survey-based measures of the labor market

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Members ratchet up discussion of normalization Conceptual obstacles in normalization arise via pace or timing asset sales Staff suggests decoupling normalization of conduct from stance FOMC members eye eventual return to Fed Funds as primary instrument Meeting participants agree on broad principles for normalization process According to today’s release of the minutes from the April 26-7 Federal Open Market Committee (FOMC), members extensively discussed different strategies for reversing

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Excess reserves temper slightly Growth of excess reserves slightly moderated over the past few weeks. The initial sharp rise over the course of the first quarter of 2011 was the result of depository institutions piling cash into excess reserves as a result of the end of the Treasury’s Supplemental Financing Program, which restricted the amount of short-term Treasury instruments available for depository institutions’ cash management. Holdings of mortgage-backed securities have declined around

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Interest rates at: 1.25% Trcihet's Speech Cloud with the 50 main words of the conference Introductory statement ( official source ) Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference here in Helsinki. I would like to thank Governor Liikanen for his kind hospitality and express our special gratitude to his staff for the excellent organisation of today’s meeting of the Governing Council. We will now report on the outcome of the meeting, which

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Inflation expectations measured via 5yr breakevens and implicit 10yr are noticeably higher than both post-QE2 and recovery-pre-QE2 periods, but measures of underlying inflation remain subdued. 10yr Treasury yields are lower than the pre-QE2 era, but the current steepness in the slope relates partially to extremely low 3m yields resulting from the end of the Supplementary Finance Program. Volatility and corporate spreads have improved relative to the recovery era , in tandem with improvements