The closely watched Federal Reserve monetary policy meeting, the Fed decided to keep interest rates unchanged at 0.25% and will total 600 billion U.S. dollars in the second round of the quantitative easing program (QE2) to keep to the middle of next year. Statement after the meeting the same basic line with market expectations, the Fed said the U.S. economy is recovering, but the pace of recovery sufficient to reduce unemployment.

The Fed decision came after the 10-year U.S. Treasury yields rose in the U.S. local time, 14 to 20 basis points to 3.50% for this year, the highest since May; Dow Jones index since the collapse of Lehman Brothers hit the highest level; The dollar index fell to an intraday low of 78.83, and later stabilized rebound.

Conservative on economic outlook

Although the United States in November retail sales data for many economists have raised their expectations of future U.S. economic growth at the same time, economists expect the U.S. Congress is likely to extend the tax cuts passed this week will further limit plan stimulate economic recovery, however, the assessment of the economic outlook the Fed is more conservative, interest-rate meeting statement was released after the ambiguous – on the one hand the U.S. economic outlook takes a positive attitude, high unemployment and low inflation on the other hand have Quedui concerns.

The Fed said in a statement the same day: “the economic recovery is continuing, albeit still insufficient to provide a lower unemployment rate.” The statement said that consumer spending is a “moderate pace” growth, the Federal Reserve that the U.S. consumer is still subject to almost 10% but the high unemployment rate.

In inflation, the Fed said “In the longer term, underlying inflation data and the Commission is still somewhat low compared to the target”, so the interest rate is expected to be in the “sustained period of” stay low.

French bank in the Dec. 15 research report that the Fed’s monetary policy still depends on changes in U.S. economic data. Despite the economic recovery still seems on track (yesterday’s retail sales data to give the market a positive signal), but as long as the job market can not give convincing turn signals, inflation remains low, then the Fed will most likely always remain loose monetary policy.

JP Morgan Chase Bank chief U.S. economist Florey said: “I think the Fed members do not believe that the next meeting on interest rates several times during any major incident occurs.” He believes that unless “substantial increase in economic growth or inflation amazing . ”

Remain the same size QE2

Fed on the second round of high-profile quantitative easing program (QE2), the Fed said in a statement “The Committee decided to continue in November, announced the expansion of the asset purchase plan” and “future information on a regular basis in accordance with the rhythm and the Securities Purchase consideration the overall size of the asset purchase plan, when necessary, adjust the plan so as best to promote employment and price stability. ”

As Federal Reserve Chairman Ben Bernanke in the December 5 television news program “60 Minutes” said, if necessary, does not exclude the implementation of the third round of quantitative easing (QE3) monetary policy, further expanding the scale of purchased debt, the market was expected to Fed will buy bonds announced the expansion of scale and specific data.

But last week Barack Obama announced plans to extend tax deadline, the market began to worry about the “second round” fiscal stimulus might cause the Fed can not adhere to the original QE2 planned asset purchases.

In volatile market sentiment, the case of mixed economic data, the Fed reiterating the middle of next year to buy 600 billion U.S. dollars higher than long-term bonds, and the magnitude of 75 billion U.S. dollars per month to buy bonds. In addition, the Fed plans to buy 300 billion U.S. dollars of treasury bonds to replace maturing mortgage bonds. November 12 this year announced the QE2 since the Fed has purchased 114.1 billion U.S. dollars of U.S. Treasury bonds.

Change next year, the Federal Reserve the right to vote

The result of monetary policy decisions of 10:1. In this policy-making meeting voted in favor of members of the Fed policy actions, including Chairman Ben Bernanke, Vice Chairman Wei Lianda Bradley, James Bullard, Elizabeth Duke, Sandra Pianalto, Sarah – Bloom Raskin, Eric Rosengren, Daniel Tharu Luo, Kevin Warsh and Janet Yellen.

Kansas City Federal Reserve Chairman Xihuo En, as always, the only cast a negative vote. Horn has always believed that extremely loose monetary policy will lead to future economic imbalances. This was his eighth in the Federal Reserve meeting on interest rates in the different views, but also in his current post in the FOMC’s last round of voting.

December 14 meeting will be the last meeting in 2010, while next year’s vote will change. From the next round of committee voting situation, the voting members of the Chicago Fed President Evans, the Philadelphia Federal Reserve Chairman Xipuluosuo, Dallas Fed President Fisher and Minneapolis Fed President Ke Xue Lake Ta.

SG pointed out that the implementation of monetary policy next year, the Fed may be more difficult because the efficiency of those who openly expressed concern QE2 will become a voting member of the Committee.

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