The Fed as expected left policy rates unchanged and ended quantitative easing. The fed funds target rate remains at a range of zero to 0.25 percent. As expected, the Fed announced that its bond purchases programs have ended this month. There was one dissent today from Minneapolis Fed president Kocherlakota who preferred to keep the current level of quantitative easing.
The FOMC characterized the economy as "expanding at a moderate pace" and with labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate.
The Fed is seeing the labor market as gradually improving.
"On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing."
The Fed is looking beyond recently weak inflation numbers from lower energy costs and sees inflation edging up.
"Although inflation in the near term will likely be held down by lower energy prices and other factors, the Committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year."
Regarding quantitative easing, the Fed as expected ends bond purchases this month but continues to maintain asset levels.
"Accordingly, the Committee decided to conclude its asset purchase program this month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions."
Guidance on future increases in policy rate increases was vague and indicated continued data dependency. But language extremely suggests low rates for quite some time.
"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
The one dissenting vote was for keeping quantitative easing at a modest pace with low inflation a key concern.
"Voting against the action was Narayana Kocherlakota, who believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level."
There were no surprises in today's FOMC decision other than who dissented. The Fed remains dovish with inflation remaining below the Fed's 2 percent target at 1.7 percent. Policy rates are likely to remain low for quite some time. New information on Fed views on policy rate changes will come with quarterly Fed forecasts out with the December statement. Currently, market focus is on policy moves in Europe and Japan as well as in the U.S. Both the ECB and Bank of Japan continue to go in the opposite direction from the Fed-leaning toward further possible easing.