On the other hand, if one desperately wanted to hear something dovish coming from the Fed, well, there were stories to suit that “mood” on tap as well. After all, some will say that even after leaving policy on hold Mr. Bernanke also promised that the Fed remains “prepared to do more as needed to make sure that this recovery continues and that inflation stays close to [the 2%] target,” and that “additional bond buying is still very much on the table.” Based on that take, gold prices not only recovered from the lows they touched the other day, but were able to stage a decent bounce all the way up to the $1,660 area on Thursday.
But let’s leave Mr. Bernanke’s words out of the equation for a minute and dissect that which his team members communicated to the markets via their individual projections. In the wake of the FOMC meeting we have learned that while only five officials felt that short-term rates ought to rise to 2% or higher prior to the end of 2014, this time around there were seven policymakers who shared that view and more than half of the US central bank’s officials envision rates climbing past 1% by that same time.
Perennially hawkish holdout Jeffrey Lacker (Richmond Fed President) once again voted against the group and said that economic progress in the US justifies hiking rates sooner than that. Let us however not lose track of the fact that the fed-funds rate expectations are for 4% or higher within about five years’ time, and that only four out of seventeen Fed officials project 0.25% to be still on the table by the end of 2014.
In the meantime, nobody seems very willing to offer further non-standard programs that feel/smell/taste/look like a QE unless and until a bad series of economic statistics derail the recovery. For the time being, such metrics are a tad hard to find, despite the moderate tone being used by Mr. Bernanke to describe both labor and housing market conditions. Fewer Americans filed for unemployment claims in the latest reporting period, pending US home sales came in at a two-year high yesterday, and California foreclosure actions fell to their lowest level in five years, prompting one industry official to declare that “the [US] housing market has clearly turned the corner.”
It thus seems that while the era of “easy money” has been with us for nearly 42 months that same era is set to end in no more than 20 and probably more like 12-16 months. We are on the other side of the accommodative curve now, and that’s the shrinking window of opportunity for the QE-addicted commodity speculators to make a go of it in various, already price-inflated assets.
As for the “bottom-line” types of items to “file” after reading the communique from the Fed, they are: a) Inflation is picking up and it is on the Fed’s radar b) US economic growth is “moderate” but will “pick up gradually in coming quarters” c) The housing sector is improving and d) Yes, there were no hints of further QE in the statement, you may stop looking for them now. Yes, even after the US-reported 2.2% GDP growth level that was reported today.