Wall Street today gave a decidedly lukewarm endorsement to the Federal Reserve's strategy of keeping interest rates low for as long as possible.
Stock prices fell in advance of the Fed's interest rate announcement, rallied briefly on word that rates were not raised, then fell back to break even just before the closing bell.
The Dow Jones industrial average ended the session up 3 points at 10,317.20. The Standard & Poor's 500 stock index gained 2 points to 1,119.55. The Nasdaq Stock Market composite index climbed to 1,950.48, a 12-point gain that made up for a little more of last week's tech stock losses.
Giving Americans more time to get used to the idea of higher interest rates, the Federal Reserve today said it is not ready to raise rates yet and when it does raise them, it will do it slowly.
As just about every Fed Watcher predicted, the Fed subtly but conspicuously changed the language it uses to describe its approach to rate-setting.
Alan Greenspan and friends dropped the word "patient" from their vocabulary and substituted the term "measured."
The old Fed approach had been to be patient about hiking rates. Now the word is that rates can be raised "at a pace that it likely to be measured."
Interpreted as moving the Federal Reserve one step closer to boosting rates, today's action was one step short of what Wall Street's interest rate hawks wanted. An odd collection of Fed critics on the left and right are arguing that the Fed ought to be moving more quickly to raise rates to avoid over stimulating the economy.
Fed officials, in fact, spelled out good reasons for hiking rates in their statement on the economy. "Output is continuing to expand at a solid rate and hiring appears to have picked up," the Fed said.
"Incoming inflation data have moved somewhat higher," the statement added, but "long term inflation expectations appear to have remained well contained."
The last phrase is where the inflation hawks part company with The Fed. They warn that the inflation expectations could easily boil over if the Fed does not back off on the gas.