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The Federal Reserve Open Market Committee (FOMC) issued its statement indicating again that interest rates will remain low for an extended period of time. The decision was unanimous.
The Fed continues to avoid any potential language which could disrupt the financial markets. Chairman Bernanke, a student of the Great Depression, does not want to do anything to damage the current stabilization in the economy.
Politically, it will also be extremely difficult for the Fed to tighten monetary policy until the employment situation improves as long as inflation remains subdued. This is especially true with mid-term elections in 2010.
The FOMC did indicate that the Fed will be phasing out the extraordinary programs utilized last year in 2010. However, this is not necessarily significant in light of the Fed leaving rates unchanged. It can always extend these funds with the discount window through the banking system.
There does not appear to be monetary tightening on the near-term horizon. The types of programs used to inject money into the economy are more a question of form rather than substance.
The Fed will most likely utilize speeches by Fed officials to telegraph any significant changes in monetary policy to minimize the chances of confusion and disruption in the market. This has been and will continue be the pattern for the near future.
The focus now shifts back to earnings and other economic news.
Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices.
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