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Fed updates 2014 economic projections

  • "The Committee sees the improvement in economic activity and labor market conditions ... as consistent with growing underlying strength in the broader economy," the FOMC says, adding that the decision to scale back QE by $10B per month is based on "the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions."
  • Although the Committee says it will "likely reduce the pace of asset purchases in further measured steps [should] incoming information support [the] ongoing improvement in labor market conditions and inflation moving back toward [the] longer-run objective," the Fed notes that asset purchases are "not on a set course."
  • FOMC also says it "anticipates .. that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5%."
  • Updated FOMC projections: 2014 PCE inflation now seen at 1.4-1.6% (from 1.3-1.8% in September); 2014 GDP now seen at 2.8-3.2% (from 2.9-3.1% in September); 2014 unemployment rate now seen at 6.3-6.6% (from 6.4-6.8% in September). Full release
  • 10-year yield is at 2.91% versus 2.87% just prior to the announcement.
  • Dow (DIA +0.9%), S&P (SPY +0.6%), and Nasdaq (QQQ) all staged brief rallies on the news but have since retraced a bit. Gold (GLD +0.3%) fell sharply initially but recovered.
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Comments (7)
  • sethmcs
    , contributor
    Comments (3406) | Send Message
     
    Shorts must be doing something bad in their shorts.
    18 Dec 2013, 02:39 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11495) | Send Message
     
    LOL what shorts? The bullish reading on the market implies practically no one is short which is half the problem. Just like 2005-2006 the Federal Reserve creates so much easy money the economy overshoots and then ... bam right in the kisser.

     

    The Federal Reserve knows very well $1 trillion a year stimulus and zirp rates is not sustainable nor is $900 billion if they want to keep selling US Treasuries to any rational entity in the foreseeable future. That means someone has to take the fall and they don't want the banks to, which means they must shift the assets to an unwary public before pulling the plug. Enjoy the economic high (which isn't so high) while it lasts. Given the run up almost exactly mirrors the run up to 1929 when the Federal Reserve engaged in QE, hopefully some people will take notice and deleverage this time.
    18 Dec 2013, 10:42 PM Reply Like
  • thotdoc
    , contributor
    Comments (1836) | Send Message
     
    FOMC also says it "anticipates .. that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5%."

     

    OK, so this will be going on for a long time and while 10BB per month is a cutback…going forward it's still a lot of purchases.

     

    I believe this cut is window dressing.

     

    I'd love to be wrong.
    18 Dec 2013, 02:45 PM Reply Like
  • starbuck89
    , contributor
    Comments (2) | Send Message
     
    "anticipates .. that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5%."

     

    more like they realize the government debt would be unsustainable if they were not there to keep interest rates artificially low. What would rates be at if fed was not the primary buyer. The future does not look to bright for my generation any way you look at it.
    18 Dec 2013, 05:58 PM Reply Like
  • joelkatz
    , contributor
    Comments (527) | Send Message
     
    Holding on to my $TMV holding!
    18 Dec 2013, 03:51 PM Reply Like
  • joelkatz
    , contributor
    Comments (527) | Send Message
     
    Holding on to my $TMV holding!
    18 Dec 2013, 03:51 PM Reply Like
  • Cameron Swinehart
    , contributor
    Comments (306) | Send Message
     
    Did I miss something or is the Fed still going to be buying $75 billion a month? This basically changes nothing. The Feds balance sheet is still near 4 trillion and will keep growing. This is a non-event if I ever saw one.
    19 Dec 2013, 10:35 AM Reply Like
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