This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs