Did You Miss this Huge Change in Today's FOMC Meeting?

By , Contributing Writer, Money Morning •

For the most part, today's Federal Open Market Committee (FOMC) meeting stuck with the program: Keep things calm before Election 2012.

"As expected, the Fed wants to stay out of the way of the election and be uninvolved in influencing it. This is what the market expected and it should have no lasting impact on the market," Jim Awad, managing director at Zephyr Management in New York, told Reuters.
With no fanfare before or after, the Fed announced it will keep the rock bottom, record low interest rates for at least three more years.

The Fed also made it clear that it will keep its foot on the pedal for an undetermined period until signs of significant improvements in the economy, unemployment level and housing market are reached.

There was, however, one interesting change in the Fed's message, one that many investors likely missed.

The Fed admitted, after years of denial, that inflation has picked up in the United States.

"Inflation recently picked up somewhat, reflecting higher energy prices," read the statement. "Longer-term inflation expectations have remained stable."

This will be important going forward to see if the Fed finally ditches its stance of "What inflation?"

Editors Note: Fed policies don’t just inflate prices. [ppopup id="70925"]Check out what this chart shows us about where the stock market is headed[/ppopup].

Today's Fed Meeting Overview

Other than the inflation comment, nothing game-changing was announced, unlike last month's delivery of QE3. The main messages of today's FOMC meeting involved asset purchases and interest rates.

The Fed statement read:

"The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. "

On interest rates, the Fed said:

"To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengths. In particular, the Committee also decided today to keep the target range for the federal funds rate at 1 to 0.25 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."

The Fed acknowledged the unemployment rate remains at an unhealthy and elevated level. It concurred companies are sorely feeling adverse effects to their bottom line from slowing growth. And while the ailing housing market is showing some signs of life, the Fed agreed housing has a way to go before a recovery can be called.

The announcement or lack thereof wasn't a surprise and didn't mean much to markets.

U.S. markets, which had been battered over the last few sessions, reeling from uninspiring third quarter earnings and lost revenue across a plethora of diverse sectors, was virtually flat before the statement and little changed following the release.

Gold, which had been treading in a narrow range Wednesday awaiting the announcement, barely budged.

Watch for Final FOMC Meeting, Minutes

Investors won't know the details and the extent of the FOMC meeting's discussion until minutes are released Nov. 14. So it will be a few weeks before market participants get an idea if the central bank plans to extend Operation Twist (the program of selling shorter dated mortgage related securities for ones further out), set to expire at the end of the year.

The real news will come at the Fed's final pow-wow for 2012 in December.

Goldman Sachs' chief economist Jan Hatzius told Forbes he expects the central bank to announce that QE3 will be expanded to $85 billion a month at the conclusion of the December meeting, a Christmas present that would be greatly accepted by investors.

Click here for a complete statement from today's FOMC meeting.

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