Fed inertia jolts Wall Street

Aug. 1, 2012 at 3:02 PM   |   0 comments

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WASHINGTON, Aug. 1 (UPI) -- The U.S. Federal Reserve said Wednesday it would stay the course on current monetary policy with an announcement that sounded a retreat on Wall Street.

Analysts had said earlier that investors were pushing stock prices higher in anticipation of a new stimulus measure expected after the Fed Open Market Committee's two-day meeting.

The Fed, however, said, "Information received since ... June suggests that economic activity decelerated somewhat over the first half of this year."

That did not push the Fed to change its policies, which includes a federal fund rate, which it will keep at historic lows of zero to 0.25 percent.

The second major policy program in play at the moment is a so-called "operation twist" in which the Fed will reinvest proceeds from maturing short-term debt buy buying long-term debt, a gesture meant to convince businesses that low interest rates will be around for a long period.

The federal fund rate would also likely remain intact "at least through late 2014," the Fed said.

All three major stock indexes on Wall Street, the Dow Jones industrial average, the Nasdaq composite index and the Standard & Poor's 500 index turned lower after the announcement, each of them dropping from positive to negative numbers on the day.

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