FOMC Extends Operation Twist through 2012 –FOMC Meeting

The Fed announced it will continue its operation twist in which the Federal Reserve will extend the average maturity of its holdings of securities. This operation twist was first started back in September and was suppose to end this month. The Fed stated it sees signs of slowdown in the U.S. economy in recent months and thus decided to make this update in its monetary policy. On the other hand no QE3. This news is likely to have some effect on bullion rates. Currently gold price is falling.

The FOMC decided to extend its operation twist by roughly $267 billion until the end of the year. In particular the Fed will:

“to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less.”

This means there is no expansion of the Fed’s balance sheet. The FOMC referred to the slowdown in the growth of the U.S.labor market; the recent non-farm employment report is backing up this claim as employment expanded by only 69,000. The Fed decided to extend the operation twist in an attempt to help the U.S economy. It’s not clear if this program, which was first announced in September, will help the U.S economy without introducing any additional stimulus plans.

The U.S. inflation remained nearly unchanged last month at an annual rate of 2.3% (for the core CPI). This isn’t something that should bother the FOMC for the time being. The FOMC will keep its pledge of the low interest rates at 0 to 0.25% at least until the end of 2014.

This news may have curbed the recent drop in precious metals prices; I suspect  without another monetary expansion (QE3), bullion traders won’t raise their ante on gold or silver. Thus precious metals will not rise.

Euros to US dollar exchange rate is currently traded down at 1.2681 a 0.03% decrease as of 17:49*.

Current gold price, short term futures (July 2012 delivery) is traded at $1,597.9 per t oz. a $25.3 decrease as of 17:37*.

Current silver price, short term futures (July 2012 delivery) is traded at $27.86 per t oz. a $0.508 decrease as of 17:37*.

(* GMT)

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