The Federal Reserve issued their statement for September today and most on Wall Street found the statement to be a quite optimistic. For the first time since August 2008 the FOMC indicated that it sees the economy accelerating, albeit at a slower pace than they would like. Maybe the biggest news out of today’s statement came from the fact that the Federal Reserve will slow its mortgage securities purchasing program to avoid disrupting the housing market as the economy starts to recover. The Federal Reserve says they anticipate finishing the program by first quarter of 2010.

While the FOMC definitely sounded more positive today, they indicated that they will be keeping rates historically low for an extended period of time, hoping to boost economic growth going forward. The goal of the Federal Reserve at this point seems to be to wind down their programs that have boosted the economy, but do so at a pace that doesn’t upset market conditions or slow any potential progress that will be made in the future. The Federal Reserve announced last month that it would be finishing off its program of buying treasury securities and now it is stating that it will tiptoe out of the mortgage securities purchases as well.

Initially stocks rose to their highest levels of the year after the announcement, but by the end of the trading day the stock market had settled lower after investors decided to take profits following a very nice run in the market over the last few months. Clearly the stock market is starting to expect a recovery and the language from the Federal Reserve has improved quite drastically over the past few months. The main thing that the economy and consumers need now is businesses to start hiring once again and the unemployment rate to begin to fall.

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*