The first move is the hardest.
The Federal Reserve defied expectations and did not reduce, or taper, its purchases of Treasury and MBS securities today, leaving them at $85 billion per month. The economic projections accompanying the statement suggest a significant divergence of views about the prospects for recovery and the outlook for interest rates. It suggests little concern about a rapidly increasing balance sheet. What comes next depends on the data, a message the Fed has been sending for some time. Markets reacted sharply, with stocks and commodities spiking, while bond yields and the dollar fell on the news that policy would remain easy for longer. Good for U.S. financial conditions, but if you were looking for clarity, today probably didn’t provide it.