Vital Market Prices at the Time of Prior FOMC Meetings

December 16, 2009

The FOMC is not expected to change its Fed funds target, nor is the conditional guidance that “exceptionally low rates for and extended period” likely to get modified further.  The last statement of November 4 made news by imposing three conditions to that pledge: low resource utilization (which can be determined from the jobless rate and capacity usage), subdued inflation, and stable expected inflation.  A modest drop in quantitative easing plans was also unveiled after the November meeting.  Today’s new statement will acknowledge a further improvement of economic conditions and prospects but probably will not modify what’s been said before about inflation. 

The dollar hasn’t recovered enough against the euro (just 2.1% since the last meeting) to be cited as a fresh disinflationary force.  With nine days remaining until Christmas and the post-holiday January sales season lurking not far away, this is not the time for the Fed to make headlines by removing the punch bowl.  Officials will be relieved to see oil prices 9.7% lower than when they met last.  Despite all the focus on large government deficit spending, ten-year Treasury yields are just 6 basis points higher now than then.  The DJIA has risen another 6.1% and is 43% above its level when the policymaking committee met last March, but don’t look for any warning about a new asset bubble to be mentioned in the FOMC release.  Doing that would send markets into a frenzy.

  EUR/$ $/JPY 10Y, % DJIA Oil, $
06/30/04 1.2173 109.44 4.63 10396 37.95
06/30/05 1.2090 110.89 3.96 10370 57.00
06/29/06 1.2527 116.07 5.20 11077 73.41
06/28/07 1.3452 123.17 5.10 13456 69.82
08/07/07 1.3749 118.55 4.73 13510 72.27
09/18/07 1.3888 115.75 4.51 13475 81.42
10/31/07 1.4458 115.28 4.42 13873 93.59
12/11/07 1.4682 111.49 4.11 13645 89.78
01/30/08 1.4792 107.31 3.70 12454 91.70
03/18/08 1.5786 98.73 3.41 12257 107.53
04/30/08 1.5562 104.58 3.83 12953 111.54
06/25/08 1.5568 108.37 4.18 11837 133.62
08/05/08 1.5445 108.42 3.97 11484 119.82
09/16/08 1.4144 105.16 3.36 10936 91.18
10/08/08 1.3625 99.87 3.50 9447 87.02
10/29/08 1.2933 97.15 3.81 9145 67.38
12/16/08 1.3790 90.14 2.52 8687 44.14
01/28/09 1.3253 90.01 2.61 8356 42.92
03/18/09 1.3115 98.13 2.94 7340 47.73
04/29/09 1.3331 97.06 3.02 8194 51.05
06/24/09 1.3984 95.43 3.59 8373 68.76
08/12/09 1.4221 96.17 3.71 9366 70.64
09/23/09 1.4779 91.50 3.50 9859 69.13
11/04/09 1.4884 90.75 3.51 9896 80.66
12/16/09 1.4572 89.56 3.57 10498 72.86

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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