The US Federal Reserve Open Market Committee is the single most powerful entity affecting investment decisions across the entire world. For the past twenty years or so investors were never really quite sure of the Fed's monetary policy because the Fed's focus was on targeting interest rates and/or targeting reserves. This left investors trying their best to interpret Fed comments on their committee meetings to determine these targeted ranges.
On Tuesday the Fed announced it has changed its policy to targeting its balance sheet. Hallelujah!! It is now a simple matter of doing the math as to whether the Fed has expanded or contracted its balance sheet to determine whether the Fed is easing or tightening monetary policy.
The US dollar was off to the races once the market truly understood the implications of this momentous decision. Unfortunately, those long energy futures were hammered this week mainly due to the swift fall of the euro on the heels of this change in Fed policy.
Congratulations to South Carolina's Ben Bernanke for driving home the need for change to the other members of the Federal Open Market Committee! The TV business news channels will surely miss parsing Fed meeting communique, but for investors who need to know exact monetary policy direction, this is a great win for the US and global economies.
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