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!