Earlier today, Federal Reserve Chair Janet Yellen and the FOMC decided to keep the benchmark interest rate unchanged, at 1-1.25%. The two-day policy meeting also resulted with the committee announcing that they will start to normalize their massive $4.5 trillion balance sheet of Mortgage Backed Securities and US Treasuries “relatively soon.” Both “decisions” seemed to have been already priced into the markets, as the major indices and the 10-year yield remain relatively similar.
Fed-watchers and economists were expecting the slow-down of the Fed’s monetary policy stimulus would go into effect as of the upcoming September meeting, and today’s results add to that consensus. However, it will be interesting to watch the pace at which they begin to unwind the balance sheet, as well as when they decide to raise interest rates again. The Fed originally provided a hawkish view, along with many other central banks over the world, but then became dovish their viewpoint after unimpressive economic data such as inflation.
