The Federal Open Market Committee meets tomorrow, with an official statement expected approximately 2:15 p.m. Eastern. No action of any significance is expected.
It was the last meeting that was the big splash known as QE2, with the Fed pledging $600 billion in government bond purchases by the end of next June to reduce interest rates and spur the economy. While there was plenty of skepticism about whether it would work, the early returns clearly show it is not.
Treasury yields and mortgage rates are up sharply since the Fed's announcement. The yield on the 10-year Treasury note was 2.63 percent prior to the Fed's November meeting, and Bankrate.com's average rate on a 30-year fixed mortgage was at a record low of 4.42 percent as of that Nov. 3 meeting.
Now, the 10-year treasury yield is north of 3.3 percent and the average 30-year fixed mortgage rate is approaching 5 percent. Talk about unintended consequences.
As the FOMC, or Federal Open Market Committee, meets, there isn't much they can do and not a whole lot they can say to fix this. Ben Bernanke is under the microscope, so expect the post-meeting statement to justify the quantitative easing, or QE2, actions by pointing to the weakness in the November employment report, the tenuous nature of the economic recovery and even European debt issues.
The Federal Reserve's actions haven't pushed rates lower. Now they'll try to talk rates lower.