The U.S. Federal Reserve took the historic step on Wednesday of setting an inflation target, of 2 percent, a victory for Chairman Ben Bernanke that brings the Fed in line with many of the world's other major central banks.
MICHAEL CUGGINO, PRESIDENT AND PORTFOLIO MANAGER OF THE PERMANENT PORTFOIIO FAMILY OF FUNDS, SAN FRANCISCO, CALIFORNIA, $15.3 BILLION A.U.M.
The inflation target is not a hot topic right now because inflation is low. Everyone is trying to address employment right now, especially since it's an election year.
They have extended this current low rate policy into 2014 which is further out on the horizon than it was before.
ERIC STEIN, PORTFOLIO MANAGER, EATON VANCE, BOSTON
The 2 percent inflation target versus the previous 1.5 to 2 percent target is a big deal. I think this is a dovish move showing the Fed is concerned about deflation and is willing to target somewhat more inflation. The dispersion is interesting, the language moving so much may have had a lot to do with the changes on the committee in terms of voting. Some of it is that the more dovish members of the committee have increasing power.
JOHN CANALLY, INVESTMENT STRATEGIST AND ECONOMIST, LPL FINANCIAL, BOSTON
What caught the market off guard was obviously the fact they are going to keep rates lower for longer.
Judging by this array of forecasts I'd say it's almost early 2015 rather than late 2014 (when tightening will begin). Unless things get a whole lot better.
This statement moves the ball slightly down the field of more QE later this year.
People are now expecting more QE, and that would be in mortgages. I think economically they (the government) would want to do that, but I don't know if politically they can withstand the forces against it.
What they (the Fed) are trying to achieve is that businesses and consumers have certainty around rates...They have no control over Europe or fiscal policy, but they have control over monetary policy.
IAN LYNGEN, SENIOR GOVERNMENT BOND STRATEGIST, CRT CAPITAL GROUP, CONNECTICUT
Our initial read on the individual projections is less dovish than the FOMC statement suggested. Highlights: 1) Longer run fed funds range 3.75 percent to 4.5 percent -- consistent with 4.1 percent neutral rate, implied by forecasts. 2) Three members see a hike in 2012. Six see a hike in 2012-2013. More hawkish than the statement 3) Only five see a hike in 2014 and four in 2015. 4) Fed forecasts dropped 2013 real GDP level modestly, but bulk of the projections largely unchanged.
ALAN LANCZ, PRESIDENT, ALAN B. LANCZ & ASSOCIATES INC., TOLEDO, OHIO
I think the statement that they're going to keep rates low through late 2014...bodes well for the economy. We don't have to worry about rising interest rates.
Obviously the Fed doesn't think inflation will be a problem. It looks like they lowered the growth target, and with that, what I think they're saying is Europe is going to influence our economic growth.
RAY ATTRILL, HEAD OF FX STRATEGY FOR NORTH AMERICA, BNP PARIBAS, NEW YORK
I don't think this has given us a whole lot of new information that hasn't already been embedded (elsewhere). The FOMC statement was so unambiguous in its dovishness that we weren't going to get a lot more out of these forecasts.
Basically, on 6 out...beyond 2014, that's not a fresh dollar sell signal. The risk is they going to push that out further at another Fed meeting. I still think that is the risk, but there's nothing in the distribution of the forecasts to lead you to that.
GREG SALVAGGIO, VICE PRESIDENT OF CURRENCY TRADING AT TEMPUS CONSULTING IN WASHINGTON D.C.
Don't see many surprises. Inflation is a non-event. Structural unemployment will be about 8 percent for some time so
you are likely to see inflation be less of a concern for some time.
(Americas Economics and Markets Desk)