Stocks Close Mixed as Fed Stands Pat on Rates

As expected, the FOMC announced at the conclusion of its two-day meeting that it is not changing its record-low key interest rate range. It reiterated that the Fed will employ all available tools to promote economic recovery and price stability and its previously announced intentions to buy mortgage backed securities, agency debt and Treasury securities.

But the market was hoping the Fed would do something to the effect of increasing the size of its purchasing programs, says Michael Strauss, chief economist and market strategist at Commonfund. "Structurally, the statement was positive," he says, "it's just that relative to expectations, or misplaced expectations for some, it wasn't as positive."

On the bright side, the Fed did provide hints that the intensity of the recession is lessening and that inflation isn't going to be a near-term problem, he says.

The FOMC said that information received since it last met suggests that the pace of economic contraction is slowing, and conditions in financial markets have generally improved.

"Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability," according to the statement.

Also, while energy and commodity prices have risen recently, the FOMC said that "substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time."