What the Fed Said

The Lehmann Letter SM

Yesterday the Federal Reserve released the statement regarding its lending to banks:

http://www.federalreserve.gov/newsevents/press/monetary/20100218a.htm

There has been some speculation that this signals a reversal and tightening of Fed policy.

Here in part is what the Fed said:

“…The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period…”

Clearly, the Federal Reserve expects economic conditions to remain weak and consequently believes that low interest rates are warranted.

© 2010 Michael B. Lehmann