The Federal Open Market Committee (FOMC) decided to lower its Federal Funds Rate target by 25 basis points to 4 ½% and to lower the Discount Rate by 25 basis points to 5%. The decision to lower the Fed Funds Rate had one dissent, and the Discount Rate decision was unanimous.

The Fed left open the possibility of additional interest rate cuts but gave no indication of future action. It also mentioned the improvement in core inflation and the equal balance between upside risks to inflation versus the downside risks to growth.

The primary concern with current Fed actions is that Chairman Bernanke will get caught behind the curve since Fed actions can take several months to a year to take effect. The GDP report this morning indicated that the economy may be more resilient than many believe. Core inflation for the moment also appears to be less of a problem.

If you combine this with the FOMC statement, it indicates that Chairman Bernanke and the Fed appear to be clearly in control of the situation. The Fed is accommodative in the face of a growing but slowing economy. This is much more preferable to a Fed aggressively easing in a severely deteriorating economy. There is also just enough inflationary pressure to dampen speculation but not enough to indicate that the Fed will have to forestall any future interest rate cuts if necessary.

Right now the Fed appears to be clearly in charge of the situation, something which has not been evident over the last several months. Volatility will continue with economic and earnings news releases. However, the slow, painful grind upwards in the stock market should continue.