Mel's Blog

It's Fed Day and at 2:15pm ET the Federal Reserve will release their interest rate decision and policy statement.

There is virtually no chance that the Fed will take any action regarding rates and we also feel there will be little change in the policy statement or change in their bias.  At the moment, the Fed still has a bias towards tightening as inflation remains above the Fed's target zone.  Many of the daydream believers who are mistakenly betting that the Fed will come to the rescue of the subprime arena by cutting rates will have their hopes dashed this afternoon...and depending on how hard or easy the Fed lets them down by the tone of the policy statement, this afternoon could see a bit of a selloff in Bonds, as these dreamers come to the realization that the Fed's mission is to fight inflation, period.  Until we see the Core Personal Consumption Expenditure (PCE) dip below 2% for a couple of consecutive months, don't expect the Fed to cut rates in the immediate future.   

Many times when the market trades quietly as we have seen for the past couple of days, it can often be followed by extra volatility.  So be sure to stay tuned to the Bond Page and text messaged quotes as the Fed meeting could spark price movement.