Fed Leaves Target Rate Unchanged, Enacts Gentle Tapering As Expected (Slowdown Of Asset Purchases, Not Unwind)

The Federal Reserve Open Market Committee (FOMC) did what was expected today. They left their target rate unchanged at 25 basis points and enacted a slooooowwww tapering of their balance sheet.

The Fed will … Undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent.

Complete the increase in System Open Market Account (SOMA) holdings of Treasury securities by $80 billion and of agency mortgage-backed securities (MBS) by $40 billion, as indicated in the monthly purchase plans released in mid-October.

o Increase the SOMA holdings of Treasury securities by $70 billion and of agency MBS by $35 billion, during the monthly purchase period beginning in mid-November.

o Increase the SOMA holdings of Treasury securities by $60 billion and of agency MBS by $30 billion, during the monthly purchase period beginning in mid-December.



o Conduct overnight repurchase agreement operations with a minimum bid rate of 0.25 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair.

o Conduct overnight reverse repurchase agreement operations at an offering rate of 0.05 percent and with a per-counterparty limit of $160 billion per day; the per-counterparty limit can be temporarilyincreased at the discretion of the Chair.

Yes, a slowdown in the trajectory of Fed asset purchases.

The maturity structure of System Open Market Holdings by The Fed?

The reaction in the stock market and bond markets? How about the Dow?

The 10-year Treasury Note yield?

The US Dollar?

I want Fed Chair Jerome Powell to sing about the tapering like Wilson Pickett.

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