An Upbeat Fed Keeps Monetary Policy Unchanged

To the surprise of no one, except for the most die-hard QE3 believers, the Federal Reserve’s Open Market Committee didn’t alter the central bank’s monetary policy at all today. The Fed repeated its intention to “to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

Ahead of the FOMC’s 2:15 p.m. ET announcement, stocks were trading well higher, primarily boosted by the healthy reading on February retail sales. The Dow Jones Industrials were up over 100 points, or about 0.9% most of the day before the Fed’s statement was released. The S&P 500 was up a similar percentage, to around 1,383, and the Nasdaq Composite traded  1% higher, around 3,015.

If any tension hung over this meeting of the Fed’s interest rate-setting committee, it was whether the central bankers would see enough new life in the U.S. economy to start changing their tune about what’s coming next and when. The overall we’re-staying-on-the-current-path statement, however, does belie a slightly more optimistic pitch in the Fed’s voice.

Today’s statement noted that “the economy has been expanding moderately,” which is also what it said in February, except that then it added the phrase, “notwithstanding some slowing in global growth.” The FOMC also deleted a phrase saying “business fixed investment has slowed.”

Regarding inflation, the Fed said: “The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.” Not much panic on the price front from Bernanke & Co.

The stock market’s immediate reaction after the FOMC meeting’s concluding announcement was to keep its earlier rally going, perhaps even with a little more brio, holding the Dow well above the 13,000 mark and the Nasdaq above 3,000. Sometimes no news is good enough.

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