Fed's Rates Same; Training Wheels Come Off in 2010

Amid some statistics that point to a slight stirring in the economy, including announcements that the Producer Price Index rose 1.8% for November (due mostly to a jump of 6.9% in the cost of energy), and of a 0.4% rise in the Consumer Price Index (caused by an energy index rise of 4.1%), the Federal Reserve announced on December 16 that it will leave its target Fed funds range at 0.0% to 0.25%. The Fed also said it will begin to phase out some of the programs that helped add liquidity to the credit markets during the financial crisis.

The Fed is still buying agency-backed mortgage securities ($1.25 trillion), and agency debt ($175 billion). But, "most of the Federal Reserve's special liquidity facilities," will end as they expire on February 1, 2010, as previously announced. This group includes the Fed's Commercial Paper Funding Facility, Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Primary Dealer Credit Facility and the Term Securities Lending Facility.

The Fed also expects that the Term Asset-Backed Securities Loan Facility will expire on June 30, 2010, and that "loans backed by new-issue commercial mortgage-backed securities," will expire as anticipated on March 31, 2010.

Comments? Please send them to kmcbride@wealthmanagerweb.com. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.

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