Today’s Fed statement contained plenty of info for traders to sort through this afternoon…..(1) This morning’s CPI report was a shocker as it indicated a decline in consumer prices, the first such decline since April, 2013.   Although “deflationary” by definition, this does not indicate European style QE is warranted, but it gives some pause to inflation “hawks”; (2) The Fed will most likely end the bond buying program next month; (3) However, the Fed will continue to re-invest maturing bonds instead of selling them off, and will not decrease the size of their balance sheet until it decides to raise short term rates.    This statement now defines the next “era” in post credit crisis policy, there will be a period of “stasis” with no bond buying or selling as the Fed is obviously concerned with the ripple effects of selling bonds.    This contradicts the road map the Fed laid out in 2011 (the balance sheet was much smaller then), (4) The question is when is the short term rate raise? Today’s forward guidance poll of Fed governors indicated a higher predicted Fed Funds rate for end of 2013 (June’s poll indicated 1.125%, today’s was 1.375%), this forward guidance spooked the bond market and send the 10 year Treasury yield to 2.63%….stay tuned… David R. Pascale, Jr.