Updated: 16-Mar-10 14:51 ET

Fed Sits Back

The Fed released its latest FOMC statement with minimal changes from the January 26-27 statement. Equity markets pushed higher on the commentary as it was a dovish statement compared to expectations. However, the gains were short lived as the move was faded, perhaps due to the relative 'status quo' economic outlook provided by the Fed. Still there was some reason for improved optimism. Some notes from the announcement:

1) Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing- The outlook on the labor markets was a slight improvement as it switched its 'deterioration in labor markets is abating' with the term 'stabilizing'. This as it turns out would be the most hawkish change in the comment.

2) Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit- No change to this outlook from the prior statement.

3) Business spending on equipment and software has risen significantly- A positive for the economy as it is an improvement from the January statement that stated 'it appears to be picking up'.

4) Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period- This remains the key part of the statement and, outside of some minute changes, has remained the same over the past couple of announcements. The 'extended period' terminology has been in place since last March.

5) The FOMC has remained steadfast in ending its asset purchase programs. The plans from the January 26-27 statement are unchanged. 
 

Fed Economic Projections (central tendencies as of February 2010)
	2010	2011	2012	Long Run
Change in real GDP	2.8 to 3.5	3.4 to 4.5	3.5 to 4.5	2.5 to 2.8
Nov projection	2.5 to 3.5	3.4 to 4.5	3.5 to 4.8	2.5 to 2.8
Unemployment rate	9.5 to 9.7	8.2 to 8.5	6.6 to 7.5	5.0 to 5.2
Nov projection	9.3 to 9.7	8.2 to 8.6	6.8 to 7.5	5.0 to 5.2
PCE inflation	1.4 to 1.7	1.1 to 2.0	1.3 to 2.0	1.7 to 2.0
Nov projection	1.3 to 1.6	1.0 to 1.9	1.2 to 1.9	1.7 to 2.0
Core PCE inflation	1.1 to 1.7	1.0 to 1.9	1.2 to 1.9	NA
Nov projection	1.0 to 1.5	1.0 to 1.6	1.0 to 1.7	NA

Fed Calendar
Date	Time	Location	Event
Mar 15	13:00		3-month and 6-month Treasury Bills Auctions -- Amount TBA
Mar 16	14:15		FOMC Policy Release
Mar 17	14:00		Bernanke Testifies Before House
Mar 18	07:30		Fed's Duke
Mar 18	09:00		Fed's Hoenig, Lacker and Pianalto
Mar 20	09:00		Fed's Bernanke
Mar 22	15:45		Fed's Lockhart
Mar 23	06:00		Fed's Plosser
Mar 23	15:35		Fed's Yellen
Mar 24	10:45		Fed's Hoenig
Mar 24	13:00		5-yr Treasury Notes Auction -- Amount TBA
Mar 25	13:00		7-yr Treasury Notes Auction -- Amount TBA
Mar 26	11:30		Fed's Warsh
Mar 26	18:00		Fed's Tarullo
Apr 06	13:00		3-yr Treasury Notes Auction -- Amount TBA
Apr 06	13:00		1-yr Treasury Bills Auction -- Amount TBA
Apr 07	13:00		10-yr Treasury Bonds Auction -- Amount TBA
Apr 08	13:00		30-yr Treasury Bonds Auction -- Amount TBA
May 16	14:15		FOMC Policy Release