The Federal Reserve policy statement yesterday was a masterful blend of contradictory words and ideas.
Nonetheless, the markets reacted with great volatility to these words, as though there was some useful information within them. You can read the entire statement for yourself here at this link.
To save you the trouble, what I’ve done is chopped the whole statement up into smaller sections and translated them (with tongue in cheek, but only slightly):
Item #1
Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn.
Translation: “Yes! In the best spirit of government intervention, we’ve turned $3 trillion in direct spending and $8 trillion in future taxpayer promises into a barely detectable statistical uptick. Not just anybody could do that.”
Item #2
Conditions in financial markets have improved further, and activity in the housing sector has increased.
Translation: “Well, housing jolly well should have picked up, considering we bought more than 100% of all issued mortgages in 2009 at market-distorting prices.”
Item #3
Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.
by former_user