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Fed Looking to Unlock Liquidity, Economist Says

Although the Federal Reserve kept monetary policy unchanged Tuesday, it was looking to spur investment, said one economist.

“What was really interesting in the statement, if you want to find one thing, was the comment on investment because this is something the Fed is fixated on: Investments lower than they’d like, even though the economic outlook is looking a little brighter,” said Diane Swonk, chief economist at Mesirow Financial.

The Federal Reserves statement noted that the U.S. economy was expanding modestly despite a global slowdown and some improvement in the labor market.

But in the near-term, Swonk said, the Fed was concerned about cash-hoarding.

“They’re making cash absolutely repulsive to hold with no reward,” she said.

Swonk said the Fed signaled that inflation was below an optimal level looked to unlock that liquidity domestically.

There was also concern about economic pressures in Europe. “Disinflation and threat of recession are right in forefront of their mind,” she said.

The Federal Reserve statement read, in part:

“While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.”

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Trader disclosure: On Dec. 13, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Karen is long PLCM; Karen is long GOOG; Karen is short SPY; Tim Seymourhas positions in AAPL, BAC, INTC; Joe Terranova is Long VRTS; Long LQD; Long MUB; Long IBM; Long EMC; Long SBUX; Long SU; Long CAT; Long SWN; Long TRLG; Guy Adami is Long C; Long GS; Long INTC; Long MSFT; Long AGU; Long BTU; Long NUE; Jon Najarian is Long CBOE; Long CME; Long GIGX; Long AAPL call spreads; Long CSCO call spreads; Long TRGT call spreads; Long PAAS call spreads; Long MBIA call spreads; Long NTRI call spreads;

Karen Finerman
Fund is long AAPL

Fund is long JPM

Fund is long IBM

Fund is long MSFT

Fund is long PLCM

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Fund is short IWM

Fund is short RTH

Fund is short MDY

Fund is short IBM calls|

Fund is short AAPL calls

Fund is short MSFT calls

For Dennis Gartman
Long Equities in EUR terms

Long crude oil futures

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Long Asian short term govt. bond

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Important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

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