(By Kevin Donovan) Is the Fed out of bullets? Or does it despair of pushing on a string?
The Federal Open Market Committee said today it extended its program of buying longer-term Treasuries and selling shorter maturities – the so-called Operation Twist – to the end of the year, and kept its target for the Federal Funds rate near zero.
Market participants holding out for another round of quantitative easing were disappointed.
Stocks, which were close to unchanged before the announcement, are lower, though not precipitously so.
The tone of the FOMC statement was not optimistic:
"Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable."
Of particular note was the FOMC's observation that consumption growth has slowed from earlier in the year, suggesting monetary policy has only provided spurts of economic activity that are not self-perpetuating.
Expect Fed Chairman Ben Bernanke in his comment to call on fiscal policy makers, that is, Congress, to get off the dime.