The long-awaited meeting of the FOMC last night has been a rather disappointing event for investors, since the official launch of "Operation Twist" has failed to stimulate them. One factor that may have destabilized the markets could be a clear division between Fed policy makers when reaching this solution. Three members of the total (Fisher, Plosser and Kocherlakota) have voted against the plan, a fact that reflects the disruption and disunity plaguing European policy decisions lately.
The "Operation Twist" from the Fed is basically in line with market expectations and involve the purchase of $ 400 billion more Treasury bonds of longer duration (6-30 years) and at the same time selling the same amount of Treasury securities in the short term of 3 years or less. Moreover, the change would maintain its current capital reinvestment program for short maturity securities. However, the bearish assessment of the economy by the FOMC has disappointed the market. As with the August meeting, Fisher, Kocherlakota, Plosser and dissent regarding the action to take. This division should not be a surprise to anyone who has heard his opinion on other monetary changes. As for the potencialeficacia, we doubt that this will provide a major change. In simplistic terms, we doubt that the U.S. loan have been hampered so far by the rates out of reach, but rather by a fear of a recession. Given that, I think it is unlikely that changing the Fed is going to have a real impact, but will be just another way to manipulate and distort asset prices. In our view, perhaps the most successful strategy, although radical, have been doing nothing, and merely expressing confidence that the U.S. economy would fit naturally by itself in due time. However, policy makers like to do something and continue to risk their already fragile credibility.