The Federal Reserve Open Market Committee (FOMC) issued its unanimous decision. The language on interest rates and quantitative easing remained unchanged. It indicated that inflation is not a problem despite a recent rise in oil prices and sees economic stabilization although continued weakness.
This decision was designed to avoid potential landmines which could disrupt the financial markets. In other words, the FOMC wanted this statement to be a non-event and seems to have largely succeeded.
It had to acknowledge that the economy remains too weak to raise interest rates and to tighten monetary policy in the foreseeable future. However, it did not want to do anything to generate panic that the Fed had lost control of the situation. The current stabilization has only recently taken hold, and Chairman Bernanke does not want to do anything to damage this.
At the same time, it had to at least acknowledge the prospect of inflation and deal with it. It did this very skillfully. It now leaves all options open in the future. Any economic concerns can be addressed by the Chairman in speeches in which there is less chance of misinterpretation.
Now, the market's focus will shift back to other economic news and earnings. Then, we will see if this is a new bull market or merely a bear rally.
Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices.
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