"The main takeaway from the press conference, in our view, came during a question on the stance of Federal Reserve policy once asset purchases are completed. The chairman repeated the policy decision in the [Federal Open Market Committee] statement that asset purchases would end in June and then said that the FOMC is 'going to continue to reinvest maturing securities, both Treasury and [mortgage-backed securities]' so that securities holdings 'will remain approximately constant.'
"Going into the press conference we had been looking for guidance on the FOMC's preference for the reinvestment policy after the conclusion of purchases and the chairman was fairly clear in stating that this policy should remain in place into the second half of the year. In addition, he clearly stated that allowing the balance sheet to shrink by letting maturing securities roll off the balance sheet was equivalent to a tightening of policy. This is important since it is likely to be the Fed's first step towards normalization of monetary policy, and removal of the reinvestment policy will signal that the tightening cycle has begun."
If you're waiting for the Fed to begin tightening for real by raising short-term interest rates from near zero, Gapen's advice is not to hold your breath:
"We continue to believe the Fed will remain patient when it comes to normalizing monetary policy and do not look for an increase in the federal funds rate until July 2012."