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}); </script> <div id="yui-main"> <div class="yui-b"> <div class="content post"> <div class="sl-layout-post"> <h1>GOLDMAN: 4 Key Points On The FOMC Announcement</h1> <div id="content" class="content"> <div class="post-top">  <div class="byline"> <a href="/author/joe-weisenthal">Joe Weisenthal</a> <span class="pipe">|</span> <span class="date">Sep. 21, 2011, 3:03 PM</span> <span class="pipe">|</span> <nobr><span class="red views" title="views">4,094</span></nobr> <span class="pipe">|</span> <nobr title="Read comments"> <a href="http://www.businessinsider.com/goldman-on-the-fed-announcement-2011-9#comments" class="comments-icon"></a> <a class="comment_count" href="http://www.businessinsider.com/goldman-on-the-fed-announcement-2011-9#comments">6</a> </nobr> </div>  <div class="share"> <ul class="share clear-both"> <li class="font-sizes"> <div class="font-sizes"> <span class="small"><a href="#" onclick="changeFontSize('small','BI_fontSize');return false">A</a></span> <span class="med"><a href="#" onclick="changeFontSize('med','BI_fontSize');return false">A</a></span> <span class="large"><a href="#" onclick="changeFontSize('large','BI_fontSize');return false">A</a></span> </div> </li> <li class="email"> <a class="buttons-image button-email" href="" onclick="gaPageTrack('Share','Click','Email');$('#share-email').toggle();$('.post embed').toggleClass('visibility-hidden'); 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height:20px;"></iframe> </li> <li class="linkedin"> <script type="text/javascript" src="http://platform.linkedin.com/in.js"></script> <script type="in/share" data-counter="right" data-url="http://www.businessinsider.com/goldman-on-the-fed-announcement-2011-9"></script> </li> <li class="fb"> <fb:like href="http://www.businessinsider.com/goldman-on-the-fed-announcement-2011-9" layout="button_count" show_faces="false" action="recommend" width="80"></fb:like> </li> </ul> <script type="text/javascript"> shadowType('#mail-from'); shadowType('#mail-to'); var ef_value = $("#email-from").val(); var et_value = $("#email-to").val(); function email_form_hide() { $('#share-email').toggle(); $('.post embed').toggleClass('visibility-hidden'); $('#mail-from').val(ef_value); $('#mail-to').val(et_value); $('div.share-email-success').hide(); $('div.share-email-body').show(); return false; } $('#email-post').click(function() { var form = $('form#form_form'); var form_data = form.serialize(); $.ajax({ type: 'POST', url: '' + document.location, data: form_data, dataType: 'json', success: function(result) { if (result.ok) { $('div.share-email-error').hide(); $('div.share-email-body').hide(); $('div.share-email-success').show(); } else { $('div.share-email-error').html(result.error_msg); $('div.share-email-error').show(); } } }); return false; }); </script> </div> </div> <div class="small clear-both"> <div class="KonaBody post-content"> <p><table class="image-container float_right" width="200"><tr><td><div class="image"><img src="http://static8.businessinsider.com/image/4e7a0dd26bb3f7da4800003d/twist.jpg" border="0" alt="twist" /></div><p class="source">Image: <a href="http://www.youtube.com/watch?v=DZAtzcthSxM">YouTUbe</a></p></td></tr></table>From Goldman on the FOMC operation twist <a href="http://www.businessinsider.com/federal-reserve-announcement-fomc-operation-twist-2011-9">announcement</a>:</p> <p>-------------</p> <p><span style="color: #000000; font-family: Arial,Helvetica,sans-serif; font-size: 13px; font-style: normal; font-weight: normal;">1. As we had expected, the Federal Open Market Committee decided to "do the twist" and increase the duration of its securities holdings by selling shorter-maturity securities ($400bn of Treasuries with maturity of 3 years or less) and buying longer-maturity securities ($400bn of Treasuries with maturity 6-30 years).<br /><br />2. The Fed chose to maintain the interest rate on excess reserves (IOER) at 25bp, contrary to our expectations of a small cut, but overall the details of today's action were more aggressive than expected in two respects: First, a relatively large portion of the purchases will occur at the long end (29% in the 20-30 year maturity bucket), implying a total impact of more than $400bn in 10-year equivalents, versus market expectations of perhaps $300-350bn. Second, the Fed will reinvest maturing and prepaid agency MBS and agency debt in agency MBS, rather than Treasuries, suggesting a bit more support for the housing sector. The statement retained an easing bias, noting again that the FOMC "is prepared to employ its tools" to "promote a stronger economic recovery in a context of price stability".<br /><br />3. Consistent with the more aggressive policy easing, the statement emphasizes the weak state of the economy, suggesting "continuing weakness in overall labor market conditions" and "only a modest pace" of growth in consumer spending. The FOMC notes the moderation in (headline) inflation in recent months and, as before, expects it to "settle...at levels at or below those consistent with the Committee's dual mandate". While the FOMC still forecasts some improvement in the pace of growth, "there are significant downside risks to the economic outlook, including strains in global financial markets".<br /><br />4. Once again, three FOMC members--Dallas Fed President Fisher, Minneapolis Fed President Kocherlakota, and Philadelphia Fed President Plosser--dissented, with the statement noting only that they "did not support additional policy accommodation at this time".</span></p> </div> </div> </div> <p class="border-bottom-dotted"> Please follow <a href="http://www.businessinsider.com/moneygame">Money Game</a> on <a href="http://twitter.com/#!/themoneygame">Twitter</a> and <a href="http://facebook.com/businessinsider.moneygame">Facebook</a>. <br>Follow Joe Weisenthal on <a href="http://twitter.com/thestalwart">Twitter</a>. <br><a href="/questions/ask?ask_author=b4645d06fec16b49f5cbea00">Ask Joe A Question ></a> </p> <div class="container"> <div class="tags"> Tags: <a href="/category/federal-reserve">Federal Reserve</a> | <a class="get-alerts" href="#" onclick="$('#alerts-dialog').dialog('open'); return false;">Get Alerts for these topics »</a> </div> </div> <h4 class="sponsored-text">Advertisement:</h4> <div class="align-center">  <div id="river"> <script type="text/javascript"> OXH.addAdUnitPlaceholder('8439', 'river'); 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Strikes! Earn three of them in a month, and you'll be <a href="/penalty-box">sent to the Penalty Box for 24 hours</a>. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. </span> </div> </b> <span class="smaller"> on <a href="http://www.businessinsider.com/c/4e7a39cbecad049c39000029" title="Permalink to this comment" rel="nofollow"> Sep 21, 3:23 PM </a> said: </span> <div class="comment-content" id="comment-content-4e7a39cbecad049c39000029"> <div class="comment-text"> Cover shorts in what? No FED QE3 money - what's exactly going to push the market up higher in the near term, the sputtering U.S. economy - you seen the data recently? International markets in Europe and Asia? U.S. Housing market? Everything has already peaked - commodities, gold, silver, oil. Only emerging bull markets left are in U.S. Dollar and long bonds now. </div> </div> </div> <div class="reply-button"> <a class="button-link" href="#comment-form" onclick="return comment_reply(this)"><span>Reply</span></a> </div> <div class="reply-container"></div> </div> </div> </div> <div id="comment-shell-4e7a39f569beddad4800001f"> <div id="comment-4e7a39f569beddad4800001f" class="comments odd cid-4e7a39f569beddad4800001f"> <div class="inner"> <div> <div class="ratings-area "> <div class="float-left ratings ratings-up"> <a class="rate-up" href="#" onclick="return comment_rate(this, 1)"> <span class="count">0</span> </a> </div> <div class="float-left ratings ratings-down"> <a class="rate-down voted" href="#" onclick="return comment_rate(this, -1)"> <span class="count">9</span> </a> </div> <div class="clear-both"> <div class="offensive-link"> <a href="#" onclick="return comment_flag_offensive(this)">Flag as Offensive</a> </div> </div> </div> <b> facebook </b> <span class="smaller"> on <a href="http://www.businessinsider.com/c/4e7a39f569beddad4800001f" title="Permalink to this comment" rel="nofollow"> Sep 21, 3:24 PM </a> said: </span> <div class="comment-content" id="comment-content-4e7a39f569beddad4800001f"> <div class="comment-text"> great FOMC ...it's just like QE2 all over again, so this will lay the groundwork for a strong stock market & commodity rally till may 2012.<br /> Interest rates never to go up again<br /> Housing, small biz, and job creation just not that important anymore in this profits, earnings, productivity & exports driven economic boom<br /> <a href="http://seekingalpha.com/user/926530/instablog/full_index" target="_blank">http://seekingalpha.com/user/926530/instablog/full_index</a> </div> </div> </div> <div class="reply-button"> <a class="button-link" href="#comment-form" onclick="return comment_reply(this)"><span>Reply</span></a> </div> <div class="reply-container"></div> </div> </div> </div> <div id="comment-shell-4e7a3a47eab8eaed15000005"> <div id="comment-4e7a3a47eab8eaed15000005" class="comments even cid-4e7a3a47eab8eaed15000005"> <div class="inner"> <div> <div class="ratings-area "> <div class="float-left ratings ratings-up"> <a class="rate-up voted" href="#" onclick="return comment_rate(this, 1)"> <span class="count">6</span> </a> </div> <div class="float-left ratings ratings-down"> <a class="rate-down" href="#" onclick="return comment_rate(this, -1)"> <span class="count">0</span> </a> </div> <div class="clear-both"> <div class="offensive-link"> <a href="#" onclick="return comment_flag_offensive(this)">Flag as Offensive</a> </div> </div> </div> <b> r cohn </b> <span class="smaller"> on <a href="http://www.businessinsider.com/c/4e7a3a47eab8eaed15000005" title="Permalink to this comment" rel="nofollow"> Sep 21, 3:25 PM </a> said: </span> <div class="comment-content" id="comment-content-4e7a3a47eab8eaed15000005"> <div class="comment-text"> sell all banks, insurance companie beause of margin compression.sell all muni ond because all pension funds will have to reduce their assumed rate of return <br /> sell all companies who cater to the baby boomers as almost all of them will run out of money in 10 years<br /> <br /> Good job Fed .Your actions have reduced the incentive to save and you have destroyed your own banking system.One of the most immoral moves in American history outside of slavery and wars </div> </div> </div> <div class="reply-button"> <a class="button-link" href="#comment-form" onclick="return comment_reply(this)"><span>Reply</span></a> </div> <div class="reply-container"></div> </div> </div> </div> <div id="comment-shell-4e7aac1669bedd926d00001e"> <div id="comment-4e7aac1669bedd926d00001e" class="comments odd cid-4e7aac1669bedd926d00001e"> <div class="inner"> <div> <div class="ratings-area "> <div class="float-left ratings ratings-up"> <a class="rate-up" href="#" onclick="return comment_rate(this, 1)"> <span class="count">0</span> </a> </div> <div class="float-left ratings ratings-down"> <a class="rate-down" href="#" onclick="return comment_rate(this, -1)"> <span class="count">0</span> </a> </div> <div class="clear-both"> <div class="offensive-link"> <a href="#" onclick="return comment_flag_offensive(this)">Flag as Offensive</a> </div> </div> </div> <b> Deep Thoughts </b> <span class="smaller"> on <a href="http://www.businessinsider.com/c/4e7aac1669bedd926d00001e" title="Permalink to this comment" rel="nofollow"> Sep 21, 11:31 PM </a> said: </span> <div class="comment-content" id="comment-content-4e7aac1669bedd926d00001e"> <div class="comment-text"> huh? what was that noise? <br /> Oh it's nothing honey, go back to sleep.<br /> Alright sweetie...Zzzzzzzz </div> </div> </div> <div class="reply-button"> <a class="button-link" href="#comment-form" onclick="return comment_reply(this)"><span>Reply</span></a> </div> <div class="reply-container"></div> </div> </div> </div> <div id="comment-shell-4e7ac162eab8ea3c34000033"> <div id="comment-4e7ac162eab8ea3c34000033" class="comments even cid-4e7ac