The U.S. Federal Reserve said on Tuesday the economic recovery was still too slow to bring down unemployment, reaffirming its commitment to purchase $600 billion in bonds to stimulate growth and create jobs.
KEY POINTS: * In a statement that contained remarkably little acknowledgment of a recent uptick in the economic data, the Fed characterized the U.S. expansion as continuing, a modest upgrade from its November description of the recovery as slow. * While the meeting likely involved some reevaluation of the economic outlook to account for the effects of proposed new tax cuts, the Fed noted measures of underlying inflation had continued to trend lower since its last meeting. * The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment, the Fed said in a statement at the conclusion of a one-day meeting. Kansas City Fed President Thomas Hoenig again dissented against the move.
ANDREW WILKINSON, SENIOR MARKET ANALYST, INTERACTIVE BROKERS, GREENWICH, CONNECTICUT
I'm slightly disappointed that the FOMC doesn't see the world in the same light that investors do. It is difficult for them to change their views quickly, and they're just being prudent, but it is disappointing, though not concerning. The Fed continues to say that the outlook for employment and spending isn't as strong as the market perceives it. No one expected them to deviate from doing all of QE2, but I was expecting them to catch up to where are.
MARKET REACTION: STOCKS: U.S. stock indexes were little changed BONDS: U.S. Treasury bond prices extended losses FOREX: The dollar fell against the yen and euro