Fed minutes shed improvement light
Posted March 13, 2012 6:22 p.m. EDT
So we finally had some movement in Treasuries today thanks to the Fed minutes. The FOMC policy statement, which was issued this afternoon, caused yields to rise and upward pressure to occur on mortgage rates. The improved sentiment recognition in the labor market, and the withholding of any reference to further stimulus, (i.e. QE3) caused the breakout from recent narrow trading.
The Fed reiterated their message that they are committed to keeping the Fed funds rate low through the end of 2014 as long as economic conditions warrant such a move.
Even though they recognize that increases in commodity prices on oil and gas might cause an increase in inflation, they feel that this move would only be temporary, and that inflation would end up tracking very close to their target rate of 2%. Keeping inflation in check is one critical part of the equation as it relates to lower interest rates.
Overall the Fed is a bit more optimistic on the state of things, but is still concerned that housing is under pressure and the employment picture, while getting better, is still far from rosy.