Stocks dip even as Fed sticks to ‘no taper’ statement

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The key sentence that most economists expected in the latest monetary policy statement from the U.S. Federal Reserve: "The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases."

In other words, no taper – a decision that follows September's surprise announcement that the Fed would continue to buy $85-billion (U.S.) worth of government bonds and mortgage-backed securities in an attempt to juice economic performance and drive down unemployment.

The timeline for when the Fed will ease back on these purchases remains fuzzy: In its statement, the Fed said that asset purchases are not on a present course, and will stay on its current path "until the outlook for the labor market has improved substantially in a context of price stability." On these subjects, the Fed says that economic activity is expanding at a "moderate" pace, that labour market condition "have shown some further improvement," that the unemployment rate is "elevated" and that inflation is running below the central bank's long-term objective.

The Fed continues to point fingers at Washington and its ongoing budgetary battles: "Fiscal policy is restraining economic growth."

In recent weeks, investors have been lapping up disappointing economic news in the hope that anything pointing to poor economic performance and slow employment growth will keep the Fed's asset-purchasing program, known as quantitative easing or QE, on track. They now have what they wished for.

The stock market, though, greeted the Fed's statement with some booing, which could be a buy-the-rumour, sell-the-news thing. The S&P 500 slipped a few points, and was last seen at 1777, down five points or 0.3 per cent. Prior to the release, the index had been down about 3 points. Similarly, the yield on the 10-year U.S. Treasury bond rose 1.5 basis points, to 2.52 per cent – or relatively steady. And gold fell just $1.63 (U.S.), to $1,343 an ounce.