FOMC Minutes and Interest Rates - FX Solutions Market Update, 13th October 2011

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Date: Mon, 24 Oct 2011 Time: 7:24 AM
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Joseph Trevisani, Chief Market Analyst at FX Solutions (http://www.fxsolutions.com/), provides forex traders with an overview of currency market activity and news on 13th Octover 2011.

Quantitative easing may be gone but it is not forgotten. Several Federal Open Market Committee members wanted to keep the option for additional asset purchases available should the economy drift closer to recession.

The current asset operation, the so called ‘Operation Twist' lengthening the term of $400 billion of Treasuries, was the result of the discussions at the September 20-21 meeting in Washington. Three Fed officials, Richard Fisher, Narayana Kocherlakota and Charles Plosser, of the 10 member board voted against the asset term extension.

According to the minutes of the September meeting released today, "A number of participants saw large-scale asset purchases as potentially a more potent tool that should be retained as an option in the event that further policy action to support stronger economic recovery was warranted". The board also choose to reinvest maturing mortgage backed security debt in the housing market in a effort to keep the Treasury portfolio from becoming too large, stated the minutes.

At that September meeting the Fed left the interest rate at zero to 0.25%, as it has since December 2008 and repeated the promise that the rate will stay there at least through the middle of 2013.

The effective Fed Funds rate was 0.07% yesterday. It has been trending slightly down over the past months. So far in October it has averaged 0.07%; in September the average was 0.08%; in August 0.10%. This year the effective daily rate has been 0.11%. Last year the daily effective rate was 0.18%; in 2009 it was 0.16%

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