Fed Cites "Strong Economic Activity", Then Does Nothing

Take a gander at the opening paragraph in today's FOMC Statement.

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Key Points

• Labor Market: continued to strengthen
• Economic Activity: rising at a strong rate
• Job Gains: strong
• Household Spending: continued to grow strongly
• Business fixed investment: moderated from its rapid pace

Fed Action

Nothing

Bond Market Reaction

• No change in yield in 3-month of 30-year bonds.
• The 5-year yield is up a few basis points while the 10-year yield and 2-year yields are up a couple of basis points.

The reaction is a bit of steepening from the perspective of the 3-month yield but a bit of flattening from the perspective 2-year and 5-year to the 30-year long bond.