The U.S. Federal Reserve on Tuesday it will maintain monetary policy stimulus for at least another two years, but the lack of concrete action was met with selling in stocks and commodities.

KEY POINTS: * It was unclear whether the decision, which involved no new commitment of funds for bond purchases, would be enough to put a floor on a U.S. stock market that has fallen more than 15 percent in the last two weeks. * The Fed said U.S. economic growth was proving considerably weaker than expected, suggesting inflation, which has already moderated recently, will remain contained for the foreseeable future. * Three officials, Richard Fisher of the Dallas Fed, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia, voted against the move.

COMMENTS:

OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON:

The statement was extremely negative in its outlook on the economy. By pegging the extraordinarily low interest rates to a date in the distant future, the Fed has essentially said that they see the current level of weakness lasting far longer than previously expected. Across the board, it was a pretty depressing view of the economy. However, it fell short of hinting at QE3 in any form and as such it is not as dollar negative as it potentially could have been. This is definitely a negative for risk appetite and that's why we're seeing the yen and Swiss franc at new highs. I suspect when the dust settles, the market will still remain averse to risk and we will likely see the dollar remain somewhat supported against the euro, the Aussie, kiwi and against higher-yielding assets in general.

KING LIP, CHIEF INVESTMENT OFFICER, BAKER AVENUE ASSET MANAGEMENT, SAN FRANCISCO:

It basically says we are going to be in a very slow growth period for the foreseeable future. Unemployment is still high. We're not going to see it below 8 or 9 percent anytime soon. We can all expect slower economic growth.

Everyone is hoping that we're wrong in terms of outlook, that this is just a temporary bump. But the problem is that the more data that comes out, the worse it gets.

I don't think the market likes it a lot. Once the announcement was announced, the market traded off pretty much from its highs...it also tells us that markets were expecting some sort of a QE3 announcement, which we didn't get.

STEVE BLITZ, SENIOR ECONOMIST, ITG, NEW YORK

It's what was expected. All they announced in this statement is the status quo. No one expected them to raise rates until the middle of 2013 anyway.

It just basically set in stone that they are going continue to do what they have been doing, so they took that uncertainty out of the market.

The FOMC minutes made it very clear that the deflation risk, not unemployment risk, will get them to do something next.

There are three dissenters that still believe that current policy is creating an inflation bias in the economy. Unless or until there is an absolute sense that the economy has entered a deflation phase, the Fed is not budging. And those three dissenters are effectively telling you that they believe that the unemployment problem is structural, the growth problem is structural, and that Fed policy is increasing the risk of inflation.

DAVID ADER, HEAD GOVERNMENT RATE STRATEGIST, CRT CAPITAL, STAMFORD, CONNECTICUT:

A dovish statement with Fed giving a more explicit time frame for current monetary stance and clearly prepared to expand balance sheet, extend duration, as warranted.

We are not so concerned with three dissents which refer specifically to the extended period language as opposed to QE3 or Operation Twist.

Consider the context of the Fed language: rates near zero for 2 more years.

The market has responded with a steepening move because the longer end didn't get an operation twist or QE3, but the front end got the language to justify carry trades.

Two-year Treasury yields at record low 19.2 basis points. Ten-year notes about unchanged from pre FOMC levels.

We think this is a good chance to fade the steepening for 10-year auction.

JOSEPH ARSENIO, MANAGING DIRECTOR OF ARSENIO CAPITAL MANAGEMENT IN LARKSPUR, CALIFORNIA:

The Fed statement was constructive. It didn't indicate an imminent shift to QE3. It pinned down long-term interest rate extension which indicates further tightening will be unlikely. This is constructive for a higher level of inflation.

The reason the market is down is because slow growth over an extended period is embedded in that statement. I don't believe that will be the case. The Fed's ability to project growth has been poor. All this indicates is the Fed will tolerate a higher level of inflation.

Longer term, the low interest rates should be positive for commodities and thus oil.

JOHN KILDUFF, PARTNER AT AGAIN CAPITAL LLC IN NEW YORK

The Federal Reserve rate signals an extended period of diminished, if not negative, economic growth for quite sometime.

This bodes poorly for demand, but may indicate additional easing measures, which we know from recent experience is supportive of asset prices, especially commodities.

The acute level of uncertainty, however, will have to be wrung out before energy prices can rebound from the upcoming round of financial machinations.

CARY LEAHEY, MANAGING DIRECTOR AND SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:

This is a lame way for the Fed to try to help the marketplace. They redefined extended period to mean at least mid-2013. But to today's marketplace, what difference does it make if they tighten in 2012 or 2013?

Even this mild change elicited three dissents which hasn't happened since 1992. They had two dissents in 2008. If they wanted to help the market they should have gone back to the language of two meetings ago when they said they would provide the tools necessary to help the recovery. The market needs a sense that the Fed is willing to do more today, rather than merely say that they're not going to tighten in mid-2012 versus 2013. Nobody really cares.

This statement won't help risky assets or the economy today.

(Ben) Bernanke has made every two-year Treasury trader happy -- at the cost of three dissents. For three dissents. he should have expanded the balance sheet by a trillion dollars.

CARL LARRY, DIRECTOR OF ENERGY DERIVATIVES AND RESEARCH, BLUE OCEAN BROKERAGE, NEW YORK, NY:

I think that this is all an overreaction by possible program trading. The move for extended lower rates through 2013 should lean to the bullish side, especially for oil.

It's more than likely we see this correct by week's end and a strong possibility we catch back up to $85 by Friday.

MICHAEL YOSHIKAMI, PRESIDENT AND CHIEF INVESTMENT STRATEGIST AT YCMNET ADVISORS IN WALNUT CREEK, CALIFORNIA:

This shows that they're willing to take action if necessary. They certainly didn't close the close the door on QE3. As expected, they talked about the muted economy, which everyone knows about. This is more about the Fed saying, 'we're still here and are ready to take action if warranted.' This shouldn't be a surprise to the market.

MARKET REACTION: STOCKS: U.S. stock indexes extended gains and then fell BONDS: U.S. bond prices were little changed FOREX: The dollar fell against the euro and rose against the yen