by David Kranzler
Investment Research Dynamics
I ordinarily do not spend time reading the FOMC policy statement after it’s released, saving that brain damage for CNBC. But I read the June release to assess for myself whether or not the Fed had tilted toward a more “hawkish” policy stance and decided that it had not. Because I’m starting to turn bullish on the precious metals sector, I decided to read the July release as well and compared it to the language in the June statement to see if the language had shifted. The degree to which the policy stance has moved back to 100% “dovish” has been understated by the mainstream media.
As an example, the Fed removed the dollar amount of its monthly Treasury and mortgage purchases ($80 billion and $40 billion). In its place it said that it would continue buying these securities “at least at the current pace.” I interpret this language – and the removal of the specific dollar amounts – as opening up the possibility of increasing the amount of monthly QE. In other words, removing the specific dollar amount levels is a subtle way to remove the boundaries on the dollar amount. The Fed also minimized its view of price inflation by referencing “muted inflation pressures.”