FOMC Cheat SheetOn Tuesday, September 21, the Federal Open Market Committee (FOMC) will hold its sixth meeting for 2010. During 2010, the FOMC meets a total of 8 times. Future meetings will occur on November 3 (the day after the midterm elections) and December 14. Investors should not expect any major policy adjustments at this meeting. Below is a "cheat sheet" for the meeting; most important for me is the market's ability to reverse a disturbing FOMC trend since the April 28th meeting.
- Priority One - Can the market reverse the trend of negative price action in the wake of the last three FOMC meetings? - Critical market highs have been established in the days preceding the April 28, June 23, and August 10 meetings. Potentially "defeating" the trend could provide a much needed psychological lift for the markets heading into Q4. If the market cannot, then, unfortunately, the Baseball Season of Frustration plays on.
Expect language that will reiterate "likely to warrant exceptionally low levels of the federal funds rate for an extended period"
Expect measures to maintain the current size of the Fed's balance sheet above $2.05 trillion
Expect the interest rate paid on bank reserve deposits to remain at 0.25%
The potential SURPRISE - introducing new language to suggest the benefits of purchasing additional assets may outweigh the costs if economic data remains weak
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