Squawk Morning Briefing: Plot Twist

Those who anticipated that the FOMC would do very little suggested they might wait before additional stimulus or, if they felt they needed to show some action, might announce a modest expansion of “operation twist.” Others thought that this might be the last chance to take significant action before Fall elections based on the belief that the Fed is unlikely to do anything which might alter political outcomes. Many with the latter view were looking for outright asset purchases.

The FOMC managed to surprise just about everyone. They shied away from additional asset purchases but extended the twist program to about as much as they possibly could. So in many ways the extent of the action surprised those who were looking for more operation twist since it likely exceeded their expectation for the amount of fed action. But even though it might have been more aggressive than their presumption it also missed the mark for those who were expecting more substantial Fed action.

While the announcement created some volatility, prices are pretty much in the same area where they have been for the past couple of days and that leaves our current outlook mostly unchanged.

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