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Hoenig Dissent Only Surprise in FOMC’s Statement

January 27th, 2010 Michael McDonough

As anticipated the FOMC reaffirmed that it “will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions…are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”  But, a hawkish sign came in the form of a dissenting vote from Kansas City Fed President Thomas Hoenig–a known inflation hawk.  This could be an indicator that the Fed is testing the waters for eventual tightening, which are likely still a ways off.  I do not anticipate we will see any changes to the Fed’s benchmark rate until the labor market realizes significant improvements, which I can’t imagine will be prior to November 2010 due to below trend growth rates.

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