Stocks Pare Gains After Fed Statement

As the Dow Jones dropped into the red again, the stock paired morning gains. Acknowledging the fact the economy was still weakened, the Federal Reserve chose to keep interest rates near zero.

As part of announcement made later in the afternoon, the Federal Open Market Committee voted 10-0 to keep the target federal-funds for interbank lending at a range of 0 to 0.25%. Spokesmen from the Federal Reserve mentioned that it was keeping rates at lower levels for the time being.

Policy makers at the Federal Reserve did however note some signs of economic stability. According to the Federal Open Market Committee, the central bank’s policy group, the economy is “likely to remain weak for some time.” Additionally, the FOMC said that consumer spending is still restricted and many businesses are making cutbacks on employees and investment.

Although the statement did little to affect most sectors of the economy, there were a few exceptions. Traders have said that the Federal Reserve’s moves were largely expected. With Federal Reserve Chairman Ben Bernanke, beginning to take a more proactive approach to ensure any policy changes wouldn’t surprise investor unduly.

With investors eyeing the shifting balance between deflation and inflation, there seems to be little certainty about where things will come to rest. This makes for a difficult waiting game in which the Federal Reserve must take some action.

The up and down motion of the trading day was influenced by early positive predictions, but the balance with the final results after the Federal Reserve’s statement be less advantageous. Stocks have been on decline for the last few weeks; this was caused mostly by the sentiments of investors searching for signs of genuine economic growth.

Ultimately, the statement did not represent any radical shift’s in Federal Reserve policy, but underscored that the central bank is fine with letting a gap widen between official rates and the Treasury yields established by traders during a given market day.

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