Wednesday, April 7, 2010

"What the Fed's 'extended period' on low interest rates might really mean"

From the Los Angeles Times' Money&Co. blog:

The Federal Reserve's promise to keep short-term interest rates low for an "extended period" has become boilerplate in its post-meeting statements.

That, in turn, has comforted financial markets, which obviously aren't in any hurry to see the Fed tighten the easy-money spigot.

But the minutes of the Fed's March 16 Open Market Committee meeting, released Tuesday by the central bank, included a discussion of what "extended period" really means -- or might mean.

The upshot: No one should assume that the "extended period" wording in a meeting statement indicates that the Fed is signaling at least several more months of rock-bottom interest rates. Policymakers might act much more quickly to raise rates, depending on the economic backdrop....MORE