The Federal Reserve Open Market Committee (FOMC) made no change in monetary policy as expected. The Fed Funds target rate remains at 0-0.25% conditional on unemployment above 6.5% and inflation at no more than 0.5% above the 2.0% target. MBS and Treasury purchases will continue at $85 billion a month with reinvested interest and Treasuries.
Given the recent spate of weak statistics in the U.S. markets probably had a small expectation that the Fed might change the economic description to reflect the perceived slippage in conditions.
In fact the economic language of the statement was essentially unaltered. The economy was expanding at a "moderate pace," the labor market was "better" but unemployment is still "elevated.” The reference to "tighter financial conditions" was eliminated.
In the context of expectations that constitutes a slightly hawkish statement and so the dollar improvement to 1.3714 against the euro and the Dow drop of 70 points.
Vote was 9-1 with Kansas City Fed's George dissenting.
Chief Market Strategist
WorldWideMarkets Online Trading