As expected, the Fed plans to conclude extra bond buying in October.
After yesterday’s FOMC meeting, the central bank head stated that as long as the labor market continues to show signs of improvement and consumer price inflation does not challenge its +2% target; it would taper the remaining $15 billion at its next meeting.
Notably, the FOMC left its "considerable time" phrase in force, stating "it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends…"
Additionally, instead of an interest rate of 1.0% to 1.25%, the FOMC expects a 1.25% to 1.5% rate by the end of 2015. That foreshadows five or six 25 basis-point hikes in the cards across 2015. There are eight FOMC meetings in a given year.
By the end of 2016, the FOMC forecasts 2.75% to 3.0% for a closing policy rate. That foreshadows six more rate hikes in 2016.
Very purposefully, there was little "new" news in the press conference, likely due to Thursday’s Scottish referendum.
Board members can close out the QE bond buying and offer us another note in October. Of course, the political problem around October 28-29 will be U.S. mid-term elections. That means, looking forward, I would expect the next FOMC meeting to be played close to the vest, too.
QE taper drama got kicked off in December 2013. I think the Dec 16-17, 2014 FOMC meeting — the last one of the calendar year — may be the meeting to focus on for “new” news at this time.
Until then, get used to the milquetoast.
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