Traders Scoff at Cut

In its accompanying statement Tuesday, the committee refrained from taking on the easing bias that investors expected. The Fed left investors once again feeling rudderless, with a central bank that is unclear and divided on where the biggest risks to the economy may lie.

"While the committee did signal that it will act as needed, its refusal to focus exclusively on downside risks to growth leave an impression of a Fed that lacks a bit of confidence in its own outlook," write Joe Brusuelas, chief economist at IDEAglobal, who notes that Fed speakers of late have been varied in their outlooks for the economy as well.

The statement acknowledged some risks to growth, some risks to inflation, and mostly uncertainty about deteriorating financial market conditions. "The committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth," read the statement.

"All this says is 'I feel your pain,'" says Bianco. "I feel your pain is not working."

The policy statement stopped well short of saying the markets are in store for a period of rate cuts. Instead, it left one paragraph focused on growth, noting that "economic growth is slowing, reflecting some intensification of the housing correction and some softening in business and consumer spending."