Fed Stands Pat on Rates, Language
The market anticipated the Fed's message, getting a slight lift in a calm session. Shortly after the latest policy statement the blue-chip Dow Jones Industrial Average ($INDU) was up 31 points, or 0.3%, at 10,673, while the broader S&P 500 ($INX) had gained 8 points, or 0.8%, to 1,158. The tech-heavy Nasdaq Composite ($COMPX) was up 14 points, or 0.6%, to 2,376.
Core inflation remains well within the Fed's comfort zone, while unemployment is forecast to stay stubbornly high well into 2012 due to the moderate pace of economic growth. With more than 8.4 million jobs lost since the end of 2007, the central bank reaffirmed that job creation is its top priority for now.
"This was a snoozer," Pimco's Bill Gross told CNBC, adding that fed won't roil the waters as it exits some of the extraordinary stimulus measures adopted to stabilize the financial system.
Although the housing market remains soft , the Fed is withdrawing support by ending its purchase of $1.25 trillion in mortgage-backed securities by month's end. With the effect on long-term rates as yet unknown, the Fed elected to reassure markets by staying the course.
In late February the Fed surprised the markets by raising the discount rate it charges on loans to banks. The Fed raised the discount rate to 0.75% from 0.5% in order to encourage banks to tap money markets rather than the central bank for short-term loans.
Shortly thereafter Chairman Ben Bernanke told lawmakers in testimony before Congress that the Fed expects unemployment -- currently at 9.7% -- to fall only about 7% by the end of 2012. Inflation, meanwhile, is forecast to run at just 2% this year.