The September statement was a much shortened version of the August statement as it appears the FOMC committee has accepted that the recovery will be slower than expected.

The new policy of reinvesting MBS principal payments into Treasury securities will continue for the foreseeable future.

Call it QE2 or call it shifting assets it appears as though the Federal Reserve’s strategy is not to shrink the balance sheet but to maintain size while it moves from the MBS market to the Treasury market. The strategy being employed is a bit dangerous, not in the near term, but in the distant future.

Currently, it is a net positive that the Federal Reserve is shifting operations from one area of the bond market to another as the invisible hand becomes less active within the market returning it to a sense of normalcy.

Mr. Hoenig was once again the dissenting voice and lone hawk believing that current policy was far too loose and that the Federal Reserve should shrink the size of its balance sheet rather than continue to reinvest proceeds of principal payments into Treasury securities.