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The Fed Just Surprised a Lot of People With This Announcement

The Federal Reserve announced Wednesday that it will not draw down its $85 billion-a-month bond-buying program, stating that the U.S. economy is not strong enough to stand on its own legs.

The Fed said in a statement it will " await more evidence that progress will be sustained before adjusting the pace of its purchases,' the statement read.

WASHINGTON, DC - JULY 18: Federal Reserve Board Chairman Ben Bernanke testifies before the Senate Banking, Housing and Urban Affairs Committee July 18, 2013 in Washington, DC. Bernanke testified on the semi-annual monetary policy report to Congress. (Credit: Getty Images)

The announcement comes as a surprise to many who believed that the Fed was ready to dial back on the quantitative easing.

The statement shows the Fed is mixed on the overall health of the U.S. economy.

"Some indicators of labor market conditions have shown further improvement in recent months, but the unemployment rate remains elevated,” the statement reads.

“Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen further and fiscal policy is restraining economic growth,” it adds.

As a result, "the Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."

In short, there will be no taper, there's no indication as to when it may happen, and the Fed has made no changes in what it believes is an acceptable unemployment rate to justify a draw down of its QE policies.

Gold has responded in a big, big way to the Fed's statement:

And U.S. stocks are going gonzo:

Here's a copy of the Fed's full statement:

Follow Becket Adams (@BecketAdams) on Twitter

This post has been updated.


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