"The Fed offered the grim assessment of the economy as it also announced it would buy long-term Treasury bonds and sell short-term bonds to help stimulate lending and growth.
“The initial and follow-up reaction from the equity market is likely the realization that the Fed has little left to offer, that Washington is a mess, and their only hope is to ‘ride it out’ over a long period of time,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan & Company.
“This is about to get ugly and there is very little anyone can do about it,” he added in a research note.
The Fed pointed to a number of long-term problems in the American economy, including high unemployment and a depressed housing market. In addition, Moody’s Investors Service downgraded ratings on three big American banks — Bank of America, Wells Fargo and Citigroup — saying government support had become less likely in the event of financial trouble.
The Fed’s statement “continued to suggest that the Fed funds rate will remain on hold until at least mid-2013,” said Rob Carnell, an analyst at ING in London. He added that quantitative easing could be introduced as early as November."
[WS:] What I do not understand is why they keep pushing policies that evidently do not work instead of switching to those that did in the past, i.e.buying goods and services? There are many business that would love to see this happen, no?
Wojtek