Market CommentariesThe Federal Reserve Keeps Interest Rates Unchanged

The Federal Reserve, as widely expected, has just voted to keep interest rates unchanged following the conclusion of its latest Federal Open Market Committee meeting. Prior to that get together, some polls had given the central bank just about a 3% chance of raising borrowing costs at the meeting. Any decision other that the one just made, therefore, might have produced some quick and sharp selling. Fortunately for the bulls, that did not occur.

As to the Fed, and in addition to the unanimous vote to keep the federal funds target unchanged, the bank also suggested that it would start to shortly wind down the massive stimulus program it embarked on nearly a decade ago in order to rescue the economy from a severe recession and financial crisis. Although the bank did not specify a date for this start, many speculate that such a move will come as early as September, when the next FOMC meeting takes place.

The Fed did use the phrase relatively soon to imply when it would begin to pare its balance sheet, therefore the suggestion that this likely means September. As to increasing borrowing costs, the bank did not tip its hand, although we sense that one additional rate increase, at most, is likely upcoming this year--perhaps in September. Finally, the Fed stated that inflation was running below its 2% target--a subtle change from the somewhat below 2% area used heretofore.

As to the stock market, it reacted in a mildly positive way with the Dow Jones Industrial Average going from a roughly 70-point gain just before the 2PM statement to an increase of close to 100 points.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.