- "the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets"
- "stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant"
- "evaluating the potential benefits of purchasing longer-term Treasury securities"
- And from the minutes, "size of the Federal Reserve's balance sheet would need to be maintained at a high level".
And since that meeting, the Fed has followed through with the following:
- $17.97 billion purchase of agency debt ($24.16 it currently holds minus $6.19 held on Dec. 17th)
- $5.78 billion purchase of mortgage-backed securities (MBS)
- Bernanke is still "considering" Treasury purchase program
The Fed has not done a whole heck of a lot since its last meeting: $17.97 billion in agency debt holdings and $5.78 billion in MBS asset purchase hardly qualifies as "large quantities". And furthermore, the mortgage and housing markets are still in need of "support". Mortgage rates are essentially where they were one year ago, and home values continue to decline.
It makes me wonder what exactly is the Fed's next move? The FOMC's usefulness is all but done - the federal funds target is almost at zero - and it's up to the Board of Governors to follow through on their policy announcements. There is likely more dissent in the ranks of the Fed than the minutes of the December FOMC meeting revealed.
Whatever glimmer of light that emerged just one month ago seems to have dimmed a bit: mortgage rates increased slightly, libor is climbing again, and of course, the banking system has taken a turn for the worse. Is nationalization in the cards?
At any rate, it seems that the Fed is on a holding pattern, which of course, has not been explained. Wednesday's announcement is unlikely to move markets, however, the meeting's minutes (released later) may provide more clues. It's like playing the game memory - trying to piece together the clues provided incrementally by the Fed in order to ascertain what exactly is the Board of Governors' next move.