Market Misreading Still-Dovish Fed - Hilsenrath

After trading in the red mid-day, markets got a boost into the 1 o'clock hour after the Wall Street Journal's most connected Fed reporter, Jon Hilsenrath, said the market might be misreading the Federal Reserve's messages. While many believed that the FOMC was more hawkish than expected, Hilsenrath said the opposite could be true.

The Dow is up 45, the Nasdaq is down 6 and the S&P 500 is up 5.

Hilsenrath noted that Chairman Ben Bernanke emphasized that even though the Fed might pull back on bond-buying later this year, it would be a long time before it took the more aggressive step of raising short-term interest rates.

Hilsenrath also noted that:

Mr. Bernanke suggested the Fed could keep short-term interest rates near zero even longer than previously planned

Fifteen Fed officials expect the central bank won’t need to raise short-term interest rates until 2015 or 2016 and just four said it would need to do so before then.

Mr. Bernanke said "a strong majority" of Fed officials had concluded the Fed won’t ever sell its growing portfolio of mortgage-backed securities, and instead will let it shrink as mortgages are paid of.

Hawk James Bullard became a very vocal dove and dissented from the Fed's policy statement

Mr. Bernanke emphasized the conditional nature of the Fed’s plan to withdraw bond-buying

The full Hilsenrath article is here.

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