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Fed May Abandon “Extended Period” Phrase for Interest Rate Policy

Little in the way of change is expected in this morning’s FOMC statement with most economists suggesting the Fed will commit to the completion of the “QEII” round of stimulus ending in June as originally planned. No change is expected in the 0.25 percent Federal Funds cap but there is a growing belief that the Fed is ready to abandon its use of “extended period” when describing the long-term interest rate outlook.

Since late 2010, Fed Chairman Ben Bernanke has relied on the phrase whenever discussing how long we can expect interest rates to remain at the historical low. However, there is a growing sense that the Fed is about to lay the groundwork for its stimulus exit plan and interest rate increases will certainly be foremost on the agenda.

Source: Bloomberg [1]

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Scott Boyd

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