Fed Rate Decision and Inflation

Today the Federal Reserve spoke and the results were what everyone expected, which was the Fed was going to stand pat and keep their current policies in place.

Fed policymakers held a key bank lending rate at a record low of between zero and 0.25 percent and pledged to keep it there for “an extended period” to help brace the economy.

The Fed acknowledged that energy and other commodity prices have risen recently. But policymakers predicted that idle factories and the weak employment market would make it hard for companies to ratchet up prices. The Fed said it expects inflation will “remain subdued for some time.”

The most important part of any Fed Rate decision is the markets reaction;  and although the decision was an expected result the market responded pretty dramatically in a negative fashion.  The Dow, which was up around 100 points throughout the morning, finished down 23 points.  And also of note is that the decline was on high volume.

On the Full post are some charts of interest.

• First is a chart from dshort.com that shows the history of inflation from the Bureau of Labor Statistics through the CPI..  to show some of what the Fed is looking at for inflation information to base their decisions on.
• Second is a chart showing the S&P 500 reaction today to the decision.   (You will have to click below on Read Full Post to view these)