The Federal Reserve decided yesterday to leave the federal funds target rate unchanged at 0-0.25%, citing the slowness of the economy's growth and stable longer term inflation expectations.  The Fed will also sell some short term Treasuries, and in return buy some longer term Treasuries.  While there were calls for more action from the Fed, Tim Duy called the Fed' stance "bold."  

Bottom Line:  I think Fed official believe they are being bold; I see them as continuing to ease policy in 25bp increments.  Expect that to continue.  Assuming the economy fails to regain momentum, the Fed will follow up with additional action – QE3 will be the next stop.  Ignore the dissents; they are background noise.  Don’t expect miracles; expect small moves, the equivalent of 15bp here, 25bp there.  The real leverage could potentially come from fiscal policy leveraging the easy monetary policy.  Print the money and spend it.  Open up the refinancing channel.  Overall, make the objective of national economic policy simply be to decisively move us off the zero bound.  Not deficits, not the dual mandate, just commit to pulling us off the bottom.

Read Duy's Fed Watch response to the FOMC meeting here.

For more analysis of the announcement and possible response today on Wall Street and in Washington, here's the Wall Street Journal's Evan Newmark, Jon Hilsenrath, and Thorold Barker: