The Fed announced Wednesday that its bond buying will decrease by an additional $10B per month to $45B, down from a high of $85B as recent as December 2013. From our vantage point, the decrease in external stimulus seems to have a limited impact on the economy.
With regards to Fed activities, we have moved our focus from quantitative easing to paying close attention to:
- The language that Fed governors use related to any movement in the federal funds rate from the current .025%; and
- Changes in the average maturity of the Fed’s overall portfolio, which, as reported recently in the Wall Street Journal, has shown a shift from shorter to longer duration securities.
Our view is that interest rates will remain low for some time.