A rare Fed dissent from three regional presidents

The Federal Reserve has kept its short-term interest-rate target at near-zero for 32 months, and yesterday its Open Market Committee announced that it’ll keep the rate there for at least another 24 months. This is what a central bank does when it wants to appear to do something to help the economy but has already fired most of its ammunition.

The announcement of a specific mid-2013 target date supplants language that near-zero rates would continue for an “extended period.” The idea is to assure markets that the Fed won’t tighten for a very long time. Investors who want higher returns will have to go further out on the risk curve for longer, and so perhaps this will keep long rates lower for longer. Equities—one form of risky asset—certainly reacted well yesterday.

Read more here.

The Federal Reserve has kept its short-term interest-rate target at near-zero for 32 months, and yesterday its Open Market Committee announced that it’ll keep the rate there for at least another 24 months. This is what a central bank does when it wants to appear to do something to help the economy but has already fired most of its ammunition.

The announcement of a specific mid-2013 target date supplants language that near-zero rates would continue for an “extended period.” The idea is to assure markets that the Fed won’t tighten for a very long time. Investors who want higher returns will have to go further out on the risk curve for longer, and so perhaps this will keep long rates lower for longer. Equities—one form of risky asset—certainly reacted well yesterday.

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