Some musings on the FOMC release…

1) Fed acknowledges a deteriorating labor and consumer spending environment. It’s one bright spot? Business investment in equipment and software. No mention of the 2010 tax relief act which allows expensing cap-ex purchases including, of all things, equipment and software up to $500,000 in year one. This is due to expire at the end of the year. Not really Fed related per se, but will this be extended? We think so.

2) The Fed expects commodities linked inflation to continue to subside. We agree over the next 3 months. After that, not so much.

3) “Extended period” language for rates used prior is now a firm mid 2013. The target remains 0-.25% for the fed funds rate. They are unwilling/unable to do anything other than trying to set expectations.

4) Maturing debt on the balance sheet will be rolled and more easing is still on the table. The Bernanke put(QE3) is in play, but we think will require a 10-15% further drop in the market and unemployment increases.

That’s it for now the full release is below.

http://www.federalreserve.gov/newsevents/press/monetary/20110809a.htm

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