Federal Reserve System Monthly Reports on Credit and Liquidity Programs and the Balance Sheet Dec 9, 2009

FOMC statement releaes Dec 16, 2009

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets...

Guha: Fed narrows policy tools...

With markets normalising and growth returning, the bank confirmed its intention to shut down emergency liquidity schemes in early 2010 and taper off asset purchases by March 31 as part of a long rolling exit from unconventional policy.

Consistent with this, the Fed also dropped another line from prior statements that said it was "monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programmes as warranted".

This appeared to signal that the Fed is reluctant to introduce any new unorthodox schemes and wants to de-emphasise the quantitative easing ("size") and credit easing ("composition") aspects of the balance sheet expansion used to fight the crisis...

Sender: Distressed debt on the wane...

Oakley: Sovereign debt burden

Economist: China's exchange rate policy

Steep yield curve graphs