Yesterday's U.S. Federal Reserve announcement proved much like the comedy sketch in the British series "Monty Python's Flying Circus", in which "suddenly... nothing happened."
The statement from the American central bank left the funds target in the 0% to 0.25% range and reconfirmed the intention to maintain very stimulative policy "at least through mid-2013". It disappointed those who expected the Fed to show its hand on its new communications strategy with no reference made to the timing or adjustments that will be made.
Instead, according to commentary from RBC Economics "the statement provided the regular assessment of recent data reports and what the Fed is doing to achieve its dual mandate of price stability and full employment."
Canada's largest bank also commented that "the detailed discussion of the domestic economy's performance gave a nod to the mild improvement in activity with the economy described as 'expanding moderately.' The Fed said that households are continuing to spend but business spending has been less robust and the housing market was referred to as 'depressed.'
RBC also pointed to the portion of the statement referring to "strains in global financial markets", which it said were keeping downside risks to the outlook alive.
"On balance," concludes the report, "the Fed stuck to its view that the economy will grow at a 'moderate pace' and that the pace of decline in the unemployment rate will be gradual."
