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AT A GLANCE: FOMC Stands Pat On Rates, Softens View On Economy
* JUNE 23, 2010, 5:53 P.M. ET


THE EVENT:

The Federal Reserve's rate-setting committee kept short-term interest rates near zero Wednesday while downgrading its outlook for the U.S. economy, indicating that short-term interest rates could remain at a record low until next year to support growth.

THE DETAILS:

The Federal Open Market Committee voted 9-1 to keep the target federal-funds rate for interbank lending in the range of zero to 0.25%, repeating its statement that the rate would stay at a record low for an "extended period." Kansas City Fed President Thomas Hoenig dissented.

CHANGES TO THE STATEMENT:

The Fed's policy-making body used more tentative language on the strength of the recovery compared to its previous meeting almost two months ago. The FOMC also noted how financial conditions had become less supportive of economic growth following the European debt crisis.

The FOMC gave a more sobering assessment of the jobs market compared to the April meeting. Then, the Fed said it was "beginning to improve." This time, the officials said the market was only "improving gradually."

The Fed also was more downbeat on household spending, saying only that it's "increasing." After the April meeting, the FOMC said spending had "picked up recently."

THE MARKETS:

Stock indexes moved lower diectly after the release of the statement, but ended the trading day narrowly mixed. Treasurys, meanwhile, rose.

The dollar fell against most of its counterparts as traders moved into risk-friendly currencies.

Fed funds futures now see no chance for a December rate hike, compared with a 10% chance before the statement, 22% odds for January hike versus 32%, and 75% odds for a March 2011 rate rise compared with 83% previously.

LOOKING FORWARD:

"Federal Reserve officials remain confident the U.S. economy is on the path to recovery, but based on the outcome of their monetary policy meeting Wednesday, they are worried about the durability of the rebound.

"The concern is well-founded, and it highlights the difficulties the Fed could face should it deem it necessary to offer fresh stimulus to the economy." - from Dow Jones Newswires' "=FED WATCH:FOMC Grows A Bit More Worried About Economy's Outlook" by Michael S. Derby

WHAT THEY SAID:

The FOMC "wanted to indicate that they're more cautious about the outlook without indicating that they're panicking at this point," said IHS Global Insight Chief U.S. Economist Nigel Gault.


-Marc Chandler of BBH said there are "no real surprises or new information in the FOMC statement," though FOMC recognized recent disappointing housing data and less supportive financial conditions abroad.


-"No rate hike before mid-2011," said T. Rowe Price economist Alan Levenson. "In the context of a relatively restrained recovery (roughly 3% real GDP growth), and in light of core PCE inflation being below the lower end of FOMC members' indicated 1%-2% comfort zone, we do not expect a rate hike before mid-2011," he wrote.


-"The longer the Fed kicks the can down the road with respect to normalizing interest rates, the more it will undermine the USD's long-term outlook," said Michael Woolfolk of BNY Mellon.

DOW JONES NEWSWIRES COVERAGE INCLUDES: -Fed Cautious On US Growth;Sees Rates Staying Near Zero -Treasurys Rise; Dollar, Stocks Slip With Fed Cautious On Economy.