The Federal Reserve retained its $85 billion purchase program and kept the Fed Funds rate target at 0.25% as expected. It also reduced its projection for economic growth in 2013 to 2.3% to 2.6% from 2.3% to 3.0% and stated that the overall risk to the economy has diminished.
Mr Bernanke, in his press conference, stressed that the flexibility of Fed policy is tied to economic recovery. The Fed Chairman said the bank could increase support of the economy if conditions warrant as well as reduce.
But despite the Chairman's careful remarks the markets are not hearing Mr. Bernanke's ambiguity. Equities and currencies are moving to the tune of higher Treasury rates. The 10-year yield has soared as high as 2.33% from 2.20% just before the FOMC statement. The euro is more than 1% lower against the dollar, dropping as low as 1.3268 from 1.3419 and the yen has fallen to 96.75 from 94.82. The Dow and the S&P 500 are 1% lower at 3:15 pm.
Chief Market Strategist