Markets

Fed commits to low rates, boosts equities

The Federal Reserve extended its commitment to loose monetary policy today, with the Federal Open Market Comitttee stating that it will work to maintain "exceptionally low levels for the federal funds rate at least through mid-2013."

The governing body of the U.S. central bank cited a struggling labor market, falling household spending and the persistent weakness of the real estate markets as the main factors in its decision.

The news was a boon for U.S. stocks , as the S&P 500 surged nearly 5 percent and the NASDAQ closed up 124 points while the Dow Jones Industrial Average clawed back almost 430 points from its massive slide yesterday.

Three members of the FOMC dissented from the commitment, an unusual sign from a body that typically works by consensus. There is a faction within the FOMC that puts more stock in inflation-related concerns than the larger faction led by chairman Benjamin Bernanke, who is more worried about employment and growth.

Notably, the Fed didn't take any active moves to calm the jittery markets - which was probably a wise decision. Responding too directly to a massive drop in equity values would put the U.S. monetary policy body in the awkward position of being seen as a slave to the whims of investors and traders. Though there may be some truth to that perception, it's definitely something the Fed tries to avoid.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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