At last week’s meeting, the FOMC made a widely-anticipated but nonetheless important change to the statement, dropping a commitment to be “patient” and thereby creating the option to hike rates at any meeting after April. In the end, this proved to be a sideshow to the more interesting changes in the Fed’s Summary of Economic Projections (SEP)—the forecasts officials’ provide at every other FOMC meeting.

Last week the Federal Reserve announced the end of its bond-buying program, which has been running with only brief interruptions for the last six years. Besides its ultimate size and duration, the striking thing about the Feds experiment with quantitative easing (QE) is that there is still not a firm consensus on exactly how it worked. Academic economists will be busy with this question for years. But from a bond investors point of view, theres enough evidence to make a few tentative conclusions.

In typical fashion, last weeks European Central Bank (ECB) announcements found a way to bury the lede. The deposit rate cut to -20 basis points from -10 basis points was characterized as a technical adjustment, and the asset purchase program, while important, lacked a specific quantitative targetforcing investors to infer a rough figure from Mario Draghis comments in the press conference.

I must have heard it on the radio recently, because Janet Yellens speech at this years Jackson Hole conference brought to mind lyrics from one of my favorite Beatles songs.

The June FOMC meeting contained a little bit for everyone and interest rates reacted only marginally after the announcements. But looking across asset marketsincluding nominal and inflation-linked bonds, equities, commodities and the dollarits clear that investors interpreted the news as another dovish surprise from the Fed. We are not sure that is the correct interpretation, and the reason comes down to the issue of data dependence.

The latest jobs report may look pretty bland on the surface, but I can assure you that it will generate plenty of intrigue among close observers of the Fed. After falling sharply in April, the unemployment rate held at 6.3%, in contrast to expectations that it would partially reverse course.

Last week, at Janet Yellen?s first meeting as Fed Chair, the FOMC revised its forward guidance for the funds rate, dropping its reference to 6.5% unemployment and instead stressing the committee?s qualitative assessment of the economy. The change was a symbolically important step, but did not alter the broader outlook for policy rates, in our view.

Monetary policy is primarily about "gaps" not growth: the Fed is trying to reduce spare capacity in the economy, not bring about a rapid expansion per se.

In a paper for last weeks IMF annual research conference, William English (head of the Federal Reserve Boards Monetary Affairs division) discussed current monetary policy strategy, with a focus on threshold rules and forward guidance. The paper caused a stir in markets but we do not think it signals a fundamental change in Fed communication. Small changes to the so-called Evans Rule are possible, but the basic framework will probably remain in place even as QE tapering begins.

One of the ironies of Ben Bernankes tenure is that he set out with a goal to improve Fed communication while in office. Immediately after his first meeting as chairman in March 2006, Bernanke set up a subcommittee tasked with facilitating debate around communication issuesincluding inflation targeting, post-meeting statements and minutes and public speeches by individual Fed officials.

A major question among investors after Janet Yellens nomination for Fed Chair is whether she will be too soft on inflation. Part of Yellens dovish reputation stems from a debate among the FOMC in July 1996, in which she warned the committee about the risks of pushing inflation too low. With the passage of time, however, the views Yellen expressed at that meeting now come across as very sensible. Indeed, today they would be considered uncontroversial among most economists. In reality Yellen is closer to the Fed consensus on inflation than her reputation in markets would suggest.

Following their surprising decision to maintain the current pace of quantitative easing (QE), Fed officials provided more detailed reasoning last week in public remarks and interviews with media outlets. Unfortunately, the latest comments added more heat than light to the QE debate in our view. Much like Chairman Bernankes post-meeting press conference, officials expressed contradictory views on several major policy questions.

Last week Federal Reserve (the Fed) officials surprised investors by choosing not to begin slowing the pace of quantitative easing (QE) despite months of setup in their public comments. Instead, the latest iteration of the Feds bond buying strategy will continue at $85 billion per month. At this point our best guess is that the decision was a path of least resistance among a divided committee: there seemed to be a number of officials who were concerned about downside risks to growth from fiscal policy uncertainty and higher interest rates.

The Fed debate this year has largely revolved around a single question: When will the FOMC begin to slow the pace of quantitative easing (QE)? At the start of the year, most analysts thought that the committee would continue its bond buying program at full speed all year, and only taper its purchases in early 2014. However, we began to hear hints from Fed officials as earlier as January that they may stop short of consensus expectations.

Despite a mediocre August jobs report, we still expect the Federal Reserve to announce a slowing of the pace of bond purchases when it meets next week. One reason for this view is that Fed officials care more about the level of the unemployment rate than the pace of job creation. We often write that monetary policy is about gaps not growth: the Fed is trying to reduce spare capacity in the economy, not bring about a rapid expansion per se.

For the last several months, talk of tapering has dominated the Fed debate. Although there remains some uncertainty around the detailssuch as how large the initial step might bemost observers now expect the Federal Reserve to begin slowing the pace of quantitative easing (QE) at the September 17-18 meeting. Attention is now turning to another major issue on next months agenda: the publication of Fed officials forecasts for the funds rate in 2016. The Fed rolls forward the Summary of Economic Projections (SEP) by one year each September.

Before joining Columbia Management I worked for several years as an economist at a few of the large broker-dealers in New York. One of my primary functions was to maintain an ongoing estimate of growth in the nations gross domestic product (GDP)a so-called GDP bean count. Most investors use GDP as their primary summary measure of overall economic performance, so they are keenly interested in how incoming data are likely to impact the estimates. Our running tally of GDP growth for the current quarter was one of the most sought after pieces of research we produced.

One of the most common mistakes policy analysts make is what I like to call normative biasallowing personal opinions to affect perceived odds of certain outcomes. Saying The Fed is unlikely to introduce quantitative easing because it would lead to high inflation is an example of normative bias. Fed officials do not think quantitative easing (QE) leads to high inflation, and whether you think it does has no bearing on the probability. Personal perceptions are irrelevant for policy analysisthe only things that matter are the perceptions of the decision maker.

Many observers blamed a lack of clarity from the Federal Reserve (the Fed) for the sharp increase in interest rates after the initial signals about tapering. As a result, in recent weeks Fed officials have tried to calm nerves by stressing that the decision to slow the pace of quantitative easing (QE)now expected to begin after the September FOMC meetingdoes not signal anything about the outlook for the funds rate or their broader policy goals. Unfortunately for the Fed, the policy outlook looks increasingly fluid again.

In the press conference following last weeks FOMC meeting, Federal Reserve (the Fed) Chairman Bernanke said that the committee was puzzled by the sharp rise in bond yields over the last two months, and that the increase seems larger than can be explained by a changing view of monetary policy. We would argue, in contrast, that the recent increase in bond yields has been almost entirely about a changing view of monetary policy.

In his press conference last week, European Central Bank (ECB) President Mario Draghi signaled that policymakers may be more open to a cut in the central banks deposit rate. Although Mr. Draghi acknowledged this move could have negative side effects, he added we will be able to deal with the negative consequences we will look at this with an open mind. Several major central banks considered negative deposit facility rates during and after the financial crisis, but so far, all have determined that the idea did not pass the cost/benefit test.

Until September of last year, the Federal Reserve structured each of its bond buying programs in the same way: it announced a fixed amount of purchases and a specific target end date. This changed with the latest quantitative easing (QE) program launched last year. This time, instead of stating a specific dollar amount of purchases, Fed officials left the program open-ended: QE would continue as long as needed to ensure a stronger recovery in the labor market.

Many things in life get better with age, but many others do not. Unfortunately for central banks, the effects of unconventional monetary policy probably fall in the latter category. Unlike traditional monetary policyin which the central bank only sets short-term interest ratesthe impact of unconventional policies likely decays over time. This means that it is not enough for the Federal Reserve to keep its current policies in placeit actually has to take additional action to maintain the same impact on interest rates and the economy.

The release of the minutes of the January Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) caused a tremor in the bedrock of investor euphoria last week. The minutes confirmed that the cost/benefit analysis of quantitative easing (QE) is at center of policy debate right now. However, the minutes did not provide a definitive signal that the program may be cut short. In particular, it is not clear where Chairman Bernanke and Vice Chair Yellen stand. I believe the level of debate slightly raises the odds that QE will end this year.

The Federal Reserve's exit from ultra-easy monetary policy still looks very far offby most accounts, rate hikes will not begin for more than two years and asset sales for even longer. However, the exit strategy could matter for markets well before that point. Fed officials have said that they will consider the costs and risks associated with quantitative easing (QE) when deciding how long to continue their purchases, and one factor they will be looking at will be whether the program could "complicate the Committee's efforts to eventually withdraw monetary policy accommodation."

Of the many possible explanations for the historically low level of government bond yields, near-zero central bank policy rates should be at the top of the list. However, government bond yields also appear low for reasons beyond central bank policy rates. In particular, todays low rate environment also reflects a depressed "term premium," or the compensation investors receive for taking duration risk.

Investors and economists have been debating the fiscal cliff for more than a year. When budget negotiations fell apart in July 2011, the White House and congressional leaders delegated responsibility for finding additional federal savings to a bipartisan "super committee". However, this group could not bridge the differences between the two parties either, and so the nation's fiscal policy was set to the fallback option: automatically begin cutting spending and allow tax rates to set higher at the start of 2013.

Prospects for this quarter's results are being very closely scrutinized. After healthy growth in Q1, Q2 results proved quite sobering, as sales decelerated and operating leverage proved hard to come by. Given continued disappointing global macro growth, Q3 results seem tracking to be close to flat year over year again. Implicit in the consensus S&P500 estimate of around $103 is a reacceleration in Q4. Implicit in the 2013 consensus of around $115 is renewed healthy growth continuing consistently through the year. Such reacceleration seems highly at risk, which raises a few questions.

With the funds rate stuck at zero for nearly four years, the Federal Reserve (Fed) has used a variety of unconventional policy tools in an effort to push longer-term interest rates lower. We think these actions affect markets in a variety of ways, and also that some of their effects may overlap.

The most surprising element in last week's Federal Reserve (Fed) decision was not the announcement of Mortgage Backed Securities (MBS) purchases or the extension of its funds rate guidance to "mid-2015," both of which were signaled fairly clearly in advance. Rather, it was the fact that the aggressive monetary easing occurred alongside an upgrade to the central bank's economic forecasts.