US FOMC Interest Rate – 04/25/12

So here’s the forecast for the actual rate decision:
12:30pm US FOMC Interest Rate Forecast 0.25% Previous 0.25% (Both Unchanged)
2:15pm US FOMC Press Conference
There is a Live Webcast available for the Press Conference, you can watch it here:
http://www.ustream.tv/federalreserve

The Analysis:As far as the FOMC statement, I’d expect minimal changes in today’s release compared to March’s Statement:

Information received since the Federal Open Market Committee met in March suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

I’d expect the above paragraph to remain largely unchanged, but if the word “significant” is taken out, then expect USD to rally…

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

I expect no real changes to the paragraph above, and if the Fed changes the period from late 2014, expect market to react violently as any date ahead of 2014 will signal strong USD, and vice versa on a date after 2012… In the paragraph below, I expect to see “Operation Twist” to continue until June 2012 as the $400 Billion USD is still ongoing, no new measures should be announced here…

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

I believe the above paragraphs to remain unchanged… I would be looking at the voting count and if Lacker changes his vote due to recent drop in NFP release, USD could be sold off…

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