As “the committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate” and they expect that “inflation will settle at levels at or below” their dual mandate, the FOMC is saying they will keep rates at “exceptionally low levels” through mid 2013. This specific time frame is what defines this statement. They also concluded by saying they “will continue to assess the economy outlook in light of incoming information and is prepared to employ” a range of policy tools available. Also of note, 3 members dissented, Fisher, Kocherlakota and Plosser as they “would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the fed funds rate for an extended period.” In other words, put an economic criteria that would warrant this and don’t be open ended about it. Bottom line, while the market is disappointed that we didn’t get another round of money printing, those expectations were very unrealistic right now. What the Fed delivered in today’s statement is still a kow tow to the market but less than another round of asset purchases or other steps discussed.
Another view of the dissent of 3 FOMC members is that they didn’t want to slap a specific time frame on the ‘exceptionally low’ level of interest rates policy as to not lock them in. Of course if economic conditions changed for the better and/or inflation went higher, the exceptionally low policy would reverse. In terms of the stock market, it wants more drugs from the Fed and weren’t happy with the small dosage this time around (even though it was more than nothing), in terms of the economy, the Fed is impotent regardless.