This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fed Keeps Rates Near Zero

WASHINGTON ( TheStreet) -- As expected, the Federal Reserve's policy-making arm left its target fed funds rate unchanged and maintained language suggesting that economic conditions would continue to "warrant exceptionally low levels for the federal funds rate for an extended period" on Tuesday.

Although much of Tuesday's review of economic conditions resembled the Committee's previous assessment in August, it did pave the way for the future implementation of additional quantitative easing, saying that the Committee is "prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." That compares with the FOMC's vague promise in August to monitor conditions and use its policy tools accordingly.

Stocks, which had been trading slightly below the flatline throughout Tuesday's session, moved higher following the Fed's release. The Dow Jones Industrial Average was adding 47 points, or 0.4%, to 10,801 and the S&P 500 was gaining 2 points, or 0.2%, to 1145. The Nasdaq was also trading higher, by 4 points, or 0.2%, at 2360.

"I expected the Fed statement to have a positive effect on markets and it did," said Commonfund Chief Economist Michael Strauss, adding that bond investors may have been disappointed that the Fed didn't implement more aggressive action.

"Equities are rallying and most investors are underinvested in equities. This may be just the push they needed," he said.

Meanwhile, yields on Treasuries weakened. Prices on the benchmark 10-year Treasury rose 30/32, diluting the yield to 2.596%.

The statement also emphasized the lack of inflationary pressures, which the Committee expects will remain weak for a while.

"With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate," the Committee said.

At its August 10th meeting, the FOMC downgraded its assessment of the economy, saying that "the pace of recovery in output and employment has slowed in recent months" and that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated." Despite recent economic data that has been less disappointing than in previous months, helping to calm fears of a double-dip recession, economic outlook expectations were largely restated in Tuesday's release. The committee also said it would maintain its policy to reinvest principal payments from its security holdings.

Earlier on Tuesday, the Commerce Department said housing starts rose 10.5% in August to a level not seen since April . Building permits also climbed to a higher-than-expected level during the month.

-- Written by Melinda Peer in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.24 1.30%
FB $99.75 -4.15%
GOOG $683.10 -0.07%
TSLA $147.99 -8.99%
YHOO $27.05 -3.30%


Chart of I:DJI
DOW 16,027.05 -177.92 -1.10%
S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs