All over the world, stock market investors care mainly about two things: (1) the Federal Reserve System’s Open Market Committee’s press release, which rarely changes; (2) rumors about forthcoming changes in the opinions of the soon-departing Ben Bernanke, whose opinions are identical to the FOMC’s.
Every six weeks, the FOMC issues a press release. These press releases rarely change. They are about 95% boilerplate. They simply reproduce the previous meeting’s press release. The next-to-last paragraph is always the focus of the investment world. It is usually the same.
The June 19 press release was the same as March’s, which was the same as January’s. Yet stock markets all over the world immediately tanked. This shows two things: (1) the world thinks its economic future depends on $1 trillion a year in counterfeit money issued by the FOMC, now and forever, Amen; (2) investors pay no attention to what the FOMC says. Here is what it said.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
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