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FOMC: Bare minimum $40B QE3 – not enough for the bond market
DE assessment: The Fed did the bare minimum of changes which was disappointing to the bond market which had been looking for something more aggressive. First, it lengthened the forward guidance by six months to mid-2015. Second, it augmented the $45B monthly operation twist with a $40B monthly MBS purchase program for $85B monthly total program, close to analysts’ expectations of a $90B program. Third, more would be purchased if needed using stronger language “until such improvement is achieved” in the labor market. (But no numerical target was given which may have disappointed some). Lacker did a double dissent opposing both the policy guidance and the additional purchases.