Yesterday's press release after the FOMC meeting hardly contained any news. The assessment of the economy was marginally improved. At the same, it was made clear (once again) that economic activity is to remain weak for a time, before a gradual return to higher levels of resource utilization set in.

A change of the key rate continues to not even be considered; as the committee put it, circumstances are likely to warrant the current exceptional low level for the federal funds rate for an extended period of time. After all, the press release did contain anything new. Purchases of Agency debt will stop once the level of USD 175bn is reached, USD 25bn below the originally envisaged USD 200bn. The reasons for this step were the pace of the purchases so far (which obviously should not be increased to meet the already set March 2010 deadline) and limited availability of these securities. Given the total security purchase program of USD 1,750bn (spread over three bond categories) a reduction by USD 25bn is an insignificant change of the Fed's monetary policy.

To put it in a nutshell, the FOMC remains cautious on the economy and sees no reason to prepare markets for any change of monetary policy. This policy stance should remain for some time yet, in our view. We expect the next hike of the key rate in 3Q10, at the earliest.