The Federal Reserve decided to keep the Federal Funds rate unchanged at the meeting it concluded today, as expected. Below is the current Fed Statement along with the one from their September meeting in paragraph-by-paragraph format, with my translation and commentary interspersed. As the graph below shows, the market is expecting the Fed to remain on hold, with Fed Funds between 0 and 25 basis points for an extended period. The graph shows the expected outcomes for the January meeting (before today’s announcement) from the Cleveland Fed. The market set the odds of anything other than standing pat at either today’s meeting or the December meeting effectively at zero. Reading off the chart, it looks like about a 95% probability of no action in January as well. I doubt we will see the Fed raise rates before the third quarter of 2010. The Fed is ...

By David Papell

Today, we're fortunate to have David Papell, Professor of Economics at University of Houston, as a guest contributor.

The Federal Open Market Committee voted last Wednesday to keep the federal funds target rate at a record low of between zero and 0.25 percent. If it was not constrained by the zero lower bound, should the federal funds rate be negative? If the answer is yes, this suggests that the rate should remain at its record low for a considerable period and provides a justification for continued increases in the Fed's balance sheet. If the answer is no, then the Fed may need to raise its interest rate target sooner rather than later.

There has been a lively debate on this topic in the context of the Taylor rule for monetary policy. The debate started with an article in the Financial

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In their official statement Wednesday, U.S. Federal Reserve policymakers said they “continue to anticipate that economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for an extended period.”

That means interest rates will remain at artificially low levels for some time to come.

And it also means the central bank’s policymaking arm, the Federal Open Market Committee (FOMC), has finally and firmly cemented its role as the Keynesian death panel for the savers of America.

The malign influence of the late economist John Maynard Keynes is nowhere more destructive than it is in the area of saving. After all, it was Keynes who proclaimed that his ideal economy would see “the euthanasia of the rentier” – an abolishment of the class of people who live off of income from savings.

We know that Keynes’ theories are still rampant in choosing U.S. fiscal policy, which has given us

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The Federal Reserve decided to keep the Fed Funds rate at its historically low level, and noted that growth was starting to pick up and there was very little threat of near-term inflation. The current statement and the one from the previous meeting (8/12) are presented below, along with my analysis of the statements and the differences between them. "Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales....

Today's Fed decision was no surprise, but questions abound about the timing of Bernanke's next move. The Federal Open Market Committee (FOMC) voted unanimously to keep the fed funds target rate between 0% and 1/4%. The wording of the statement reflected a slightly more upbeat assessment of the economy, with the observation that "economic activity has picked up." In August, the Fed opined that "economic activity is leveling out." Expectations for long-term inflation were described as "stable," which is new language and something I don't necessarily agree with. A change to the planned purchase of agency mortgage-backed securities was also made, with the program now scheduled to end in the first quarter, instead of next month. Today's meeting was a no-brainer for Bernanke. All he had to do was say the economy is getting better and he wasn't tightening policy. Give the Fed chairman credit for ...

U.S. Federal Reserve Chairman Ben S. Bernanke said yesterday (Tuesday) that the worst recession since the Great Depression is “very likely over.” However, Bernanke also said that unemployment would remain high and keep the recovery from accelerating.

“Even though, from a technical perspective, the recession is very likely over at this point,” Bernanke said, “it’s still going to feel like a very weak economy for some time, as many people still find that their job security and their employment status is not what they wish it was. So that is a challenge for us and all policy-makers going forward.”

The real challenge for Fed policymakers will be to gingerly dismantle all of the programs they set in place to backstop the markets – such as the Commercial Paper Funding Facility – which holds $109.2 billion in short-term IOUs issued by corporations – and the Term Asset-Backed Securities

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Consumer Borrowing Collapses…What’s up with sterling? Option ARMs get ready to reset…Gold falls back to below $1,000…And Now… Today’s Pfennig!

Good day… And a Wonderful Wednesday to you! Well… The currencies, for the most part, kept the heat on the dollar throughout the day and in the overnight markets. The euro, did rise to 1.45 and change yesterday, while it is hovering right at that figure this morning, so it did give a little bit back.

There were no big announcements last night like we saw on Monday, so the currencies didn’t have anything to push them further. In fact, there may be a “letting the dust settle” period of time, with the Big Dog, euro, before we see any further advancement, given the euro’s huge gains yesterday…

We did have “Mr. Yen” Sakakibara, tell a crowd of people that he

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The worst global recession since World War II is ending faster than previously thought, but the recovery will still be a slow one, the Organization for Economic Cooperation and Development (OECD) said today (Thursday).

For the combined economy across the Group of Seven (G7) nations, the OECD expects a contraction of 3.7% this year, down from the 4.1% drop it projected in June. Still, the organization sees ample spare production capacity, low levels of profitability, rising unemployment and “anemic” growth in incomes will keep an uptick in consumer demand in check, and it says the need remains high for businesses …

Government budget hits all-time insanity… record monthly, year-to-date deficits… “Cash for clunkers” helps GM, but not economy… July retail sales stage surprise fall… Fed plans exit strategy, ends bond buys… why the FOMC is still not helping you… Byron King’s crude reality: How Canada could be the next Saudi Arabia…

It’s official: Our government ran a record $180.7 billion over budget in July, the Treasury Department said today. That’s just a bit over Wall Street expectations and just under the Congressional Budget Office estimate we reported Monday. Thus the government tab so far this fiscal year is a record $1.27 trillion, not the record $1.3 trillion the CBO guessed earlier this week. Phew… what a relief.

A few more scary details:

The budget deficit is still on track to exceed $1.8 trillion by October, the end of the fiscal year. That would be four times last year’s record budget July spending rose to over ...

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