Today the Federal Reserve announced that it would keep interest rates at the current 0-0.25% level. The all important monetary policy statement included some very slight changes in wording, but it was mostly the same as before. The small changes included a bit of an upgrade in their comments on the current state of the economy. The FOMC now says that economic activity is indeed improving and the labor markets are picking up. They included a note about household spending improving, albeit at a slow pace because of constraints on the consumer.

One of the big questions before today was whether or not the FOMC would keep the line about expecting interest rates to stay low for an extending period of time. In fact, they did keep that particularly wording just the same as it has been. Clearly, the Federal Reserve believes things are getting better, but they are being very cautious making any kind of move toward higher interest rates. The situation in Greece has also served to keep the world on notice that the credit crisis isn’t completely over in the global economy.

The next move for the Federal Reserve has to be up since interest rates can’t go any lower. The million dollar question is, when will that move to higher interest rates take place? While Wall Street often trembles at the talk of any raise in interest rates, at some point rates will need to move slowly higher. At first it may cause investors to grow concerned, but in the long run interest rates need to move to a more normalized level. For the many consumers who use money markets and certificates of deposit to increase their savings, a move to slightly higher rates would be a very welcome site.

Interest rates are staying the same for now and they probably will for a while, but next time you hear rates may be moving higher don’t immediately think that will ruin the economy.

The Federal Reserve Board announcement today was that there will be no change at all in its policy from it’s previous policy statement. The Federal Reserve said it will keep interest rates at the unprecedented rate of zero to 0.25% for the foreseeable future, saying it would “keep interest rates low for  an extended period.” The Fed also said that it will continue its previously announced Treasury buys to try to bring more confidence to the marketplace and stimulate the economy. Treasury market investors were actually fairly disappointed today, as some had expected the Fed to announce an increase in the amount of purchases it would be making.

Stock traders were also fairly disappointed with the Federal Reserve announcement because of the lack of changes. The fact that there was no change in the federal funds rate was expected, but the lack of any kind of additional stimulus news or details on what the Federal Reserve may do to help the economy exit this deep recession did shock quite a few people. It seems that the statement was taken as just continuing with the status quo, and many traders and strategists on the street wonder whether that will be good enough to help the economy move higher.

In fairness to the Federal Reserve, it is in a very tight box right now. The Fed has taken heat from many about fiscally irresponsible, and is trying to stay within its boundaries as best as possible while still responding in a firm way to a major economic crisis.  Over time if changes need to take place I certainly hope the Fed will be quick to respond to an economy that changes on a daily basis. For now it seems that the Federal Reserve believes that things are getting better very slowly, and that the current course is the right course for this economy.

*If you would like to read the full text of today’s FOMC Monetary Policy Statement Click Here*