NEW YORK (TheStreet) -- Judging by the choppy trading that followed the Federal Reserve's decision to twist again, Wall Street doesn't think much has changed in the past day.
Ben Bernanke & Co. are going to maintain the size of the central bank's balance sheet through the end of the year, selling bonds with shorter-term maturity dates and buying the same amount with long-term ones. The commentary surrounding another round of quantitative easing, popularly known as QE3, was pretty boilerplate.
The Fed seems firmly in defense mode. Bernanke tweaked Congress a bit, saying monetary policy can't do it all when it comes to fixing the economy, and he voiced a conservative brand of optimism when asked about Europe's problems, the ability of his counterparts across the pond to get the job done.
Most worrying was probably the lower GDP growth projection for 2012 -- down to a range of 1.9-2.4% from a prior view for growth of 2.4-2.9% -- but all in all, there was nothing to get too worked up about one way or the other.Ian Shepherdson, chief U.S. economist at High Frequency Economics, broke down the conundrum facing investors trying to interpret where the Fed goes from here. "Mr. Bernanke's press conference surely left few doubts that the Fed will take more aggressive action and renew QE if the economy fails to perform as they expect," he wrote. "But the Fed Chairman did not make it clear exactly how the Fed might reach that judgment, not least - in our view - because the FOMC is fundamentally split on the question." Shepherdson would have liked more detail on what the Fed thinks is holding the economy back. "We also wonder if the Fed has reached any sort of consensus on why growth has slowed in recent months; Mr. Bernanke said there have been 'issues with weather, seasonal adjustments and other factors' but did not even mention the rise in gas prices, which we think has been the key factor," he said. "The state of the labor market appears key to further action - progress is not fast enough; the Fed wants 'sustained' improvement - but for now the Fed thinks more twist will help. Maybe, a bit." That kind of sums it up. Wednesday's proceedings were really a whole lot of nothing, and while the extension of Operation Twist could help a little, it's far from the jolt some market watchers believe will ultimately be required to get the economy firing on all cylinders again.
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