May 1, 2013

BUILD YOUR OWN FED STATEMENT! (5/1/2013 edition)

May 1, 2013

BUILD YOUR OWN FED STATEMENT! (5/1/2013 edition)

Parsing the Fed is everyone’s favorite game, so before the Fed wraps its third meeting of 2013 in a couple hours (schedule), my friend and industry colleague Ted Rood invites you once again to play “Build Your Own Fed Statement!” Just choose your favorite answers from the Ted Statement below.

Rates near record lows ahead of the Fed meeting, and here’s WSJ on what to expect.

Follow on Twitter for rate market reaction to today’s actual statement at 2pm ET.


It’s easy to win: just choose the most appropriate phrases.

Information received since the Federal Open Market Committee met in March suggests a return to moderate economic growth following (a pause late last year; 2013′s first recession; Michael Jordan’s wedding expenditures). Labor market conditions have shown signs of improvement in recent months but the (unemployment rate; sequester driven flight delays; Jets’ QB uncertainty) remains elevated. Household spending and business fixed investment (advanced for no apparent reason; may never return to prior levels; will drop precipitously as taxes sap consumer funds), and the housing sector has strengthened further, but (fiscal policy; Justin Bieber’s weed supply; world economic prospects for the decade) have become somewhat more restrictive. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in (energy prices; demand for Tim Tebow jerseys; sales of “water pipes” in Washington and Colorado). Longer-term inflation expectations have remained stable (as wary consumers eye ObamaCare costs; despite unprecedented Fed easing; until taxes are counted in Consumer Price Index).

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a (moderate; snail’s; relaxed to leisurely at best) pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate (as the labor participation rate plummets to unprecedented lows; if Tim Tebow miraculously finds gainful employment; until NFL teams begin training camp roster cuts). The Committee continues to see downside risks to the (comfort level in pro sports locker rooms; looming April jobs report; prospect of sales tax on its Amazon and iTunes purchases). The Committee also anticipates that inflation over the medium term likely will (run at or below its 2 percent objective; probably vanish as deflation devastates the economy; soon become as relevant as Barney Frank).

To support a (stronger economic recovery; glimmer of hope for America despite legislative impotency; façade of fiscal responsibility by the Committee) and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of (reinvesting principal payments from its holdings of agency MBS; joint Committee Happy Hours with the Supreme Court; refinancing their homes five times per year). Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor (incoming information on financial developments; nude or semi-nude Olivia Wilde pictures; the Bernanke’s Linkedin account for job change updates) in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the (outlook for the labor market; Hangover 3 movie trailers; prospects for a functional Italian government) have improved substantially. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy of such purchases as well as the (near certain announcement of a Jason Collins reality show on Bravo, progress toward its economic objectives; probability of Social Security remaining solvent).

To support continued progress toward maximum (employment and price stability; political maturation for Ron Paul’s son; stock market returns despite faltering economic conditions), the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time and the (economic recovery strengthens; Committee successfully dissolves Congress once and for all; North Korean leadership becomes less cartoonish). In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions. When the Committee decides to begin to remove policy accommodation, it will take a (seven-figure private sector job; long overdue sabbatical; nice hot bath) consistent with its longer-run goals of maximum employment and inflation of 2 percent.