Market Quotes at Previous FOMC Meetings

June 23, 2010

In response to concerns about tighter Chinese policies and Europe’s sovereign debt problems, the global environment looks riskier than when the FOMC last met in late April, and that cloud is reflected in market movements over the past eight weeks.  The 10-year Treasury yield declined 63 basis points.  The last time when the FOMC met with long-term yields as low as now was in April 2009.  Moreover, the S&P 500, Nasdaq and Dow Jones Industrials have weakened by 8.6%, 9.1%, and 7.0% since the FOMC last met, and oil prices are 7.9% lower now than then.  The dollar has been mixed, with a gain of 7.5% relative to the euro but a drop of 4.2% versus the yen.

A number of U.S. economic indicators have been weaker than assumed, notably those depicting the labor market where the layoff rate remained high and failed to fall and where May produced only 41K private-sector jobs.  Retail sales sank 1.2% in April, and more recent weekly data do not show an improvement.  Housing statistics were weak, and the trade balance is wider.  The oil spill in the Gulf is doing damage that mounts by the day.

The three earlier FOMC statements of 2010 documented a progressively improving situation.  April’s statement talks of a continued strengthening of activity, with an upgraded assessment of consumption, housing and the labor market.  The statement after that last meeting reiterated that financial market conditions remain supportive of growth and that business spending on equipment and software is rising significantly.  A further sign of the upbeat move was seen in an unexpected dissent by Tom Hoenig, who favored dropping the sentence on rate guidance, which since March 2009 has opined that “economic conditions… are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

In the more tenuous environment of late June, the FOMC is not expected to abandon the rate guidance now, nor is Hoenig likely to be joined by other dissenters.  The Fed funds target will stay at 0-0.25%, and there is a chance that the assessment of growth may be downgraded in subtle ways.  The language on inflation still looks appropriate:  “With substantial resource slack continuing to restrain const pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.”  But policymakers will retain a readiness to do what’s needed to promote both “economic recovery” and “price stability.”

A new statement gets released today at 14:15 EDT.

  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 1.4542 89.78 3.56 10478 73.14
01/27/10 1.4045 89.49 3.61 10148 73.31
03/16/10 1.3756 90.64 3.67 10645 81.45
04/28/10 1.3157 94.10 3.75 11043 82.57
06/23/10 1.2234 90.11 3.12 10269 76.03

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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