Ben Bernanke Delivers The Least Surprising Surprise Of The Year

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Yea, we know: This was it. This was going to be the Fed Open Market Committee meeting that would mark the beginning of the end of QE3. Everyone (well, almost everyone) was sure of it. Until, like all of the previous meetings that were supposed to mark the beginning of the end, it didn't.

The Federal Reserve postponed any retreat from its long-running stimulus campaign Wednesday, saying that it would continue to buy $85 billion a month in bonds to encourage job creation and economic growth.

As Congressional Republicans and the White House hurtle toward another showdown over federal spending, the Fed said it was concerned that fiscal policy once again “is restraining economic growth,” threatening to undermine what the Fed had described just months ago as a recovery gaining strength….

“The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and the labor market,” it said in a statement released after a regular two-day meeting of its policy-making committee.

The decision, an apparent victory for the Fed’s chairman, Ben S. Bernanke, and his allies who have argued for the benefits of asset purchases, was supported by all but one member of the Federal Open Market Committee. Esther George, president of the Federal Reserve Bank of Kansas City, dissented as she has at each previous meeting this year, citing concerns about inflation and financial stability.

Predictably, this followed:

The S&P 500 has gained 0.9% to 1,720.73, while the Dow Jones Industrials has gained 0.8% to 15,648.18. Both are new all-time highs.

Now, everyone can go back to doing what they do so well: Parsing the soon-to-be-voluminous words of Fed officials to support their contention that the central bank will definitely and without any doubt start cutting back on bond purchases at the next FOMC meeting (for the record, Oct. 30). It is a prediction which logic suggests will be correct someday.

In Surprise, Fed Decides Not to Curtail Stimulus Efforts [NYT]
Fed Stands Pat on Bond Buying [WSJ]
S&P 500, Dow Hit Record Highs as Tapering Tabled For Now [Barron's Stocks To Watch blog]
After Fed Meeting Officials Have Heavy Speaking Schedule [WSJ Real Time Economics blog]

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