Fed Decision: What I Wish Bernanke Said

The Federal Reserve's Open Market Committee has met and here's the upshot: NO CHANGE, exactly as Mark Thoma predicted yesterday.

Here's what you need to know about current Fed policy:

• Federal funds rate (short term interest rates) = 0 - 0.25 percent (rates have been at this level since 12/16/08)
• Fed will keep "exceptionally low levels of the federal funds rate for an extended period"
• "QE2″or the central bank's $600 billion dollar bond-buying plan that was launched last November, will terminate as of June 30th, as planned. The Fed will continue reinvesting about $10-15 million worth of bonds on a monthly basis

• The economy is growing, but only at a moderate pace
• 2011 growth estimate: 2.7 - 2.9% (revised down from the April estimate of 3.1 - 3.3%
• The job market is weaker than anticipated
• 2011 unemployment estimate: 8.6 - 8.9% by end of the year
• Inflation has ticked up, but over the long-term, it should not be a problem
• Higher food and gas prices are seen as temporary
• Supply chain disruption from the Japanese earthquake and tsunami have negatively affected the economy
• Although the recovery is slow, the pace of recovery should pick up in second half
• Housing still stinks

• QE3 unlikely because no deflation (declining prices) and wages are rising (note: these increases can be seen everywhere except in your paycheck)
• Growth is likely to pick up next year
• If the Fed is wrong and everything goes to pot, they'll fire up the helicopter and drop money into the financial system

• The Fed can't really do much about the current economic slowdown--you want action, tell the morons in Washington to spend a few bucks!
• The problem in the economy is that there's no demand...that's the deal when dual credit and housing bubbles explode--people want to pay off their debt, not buy more stuff-DUH!
• Traders, sit tight--I'm not bailing you out just yet...if things get ugly, you know I got your backs...hello QE3!

Jill Schlesinger

Jill Schlesinger, CFP® is the Emmy-nominated business analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and chief investment officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.

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