FOMC Meeting: Fed Keeps Same Narrative, Taper Proceeds – but Markets Move

The U.S. Federal Reserve stuck to its usual script today after the Federal Open Market Committee (FOMC) meeting. The Fed announced the expected $10 billion cut to its almost two-year-old bond-buying program and reaffirmed its intention to keep interest rates low for a "considerable" period of time.

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Strangely enough, the news of unexpected and optimistic growth figures for the U.S. economy released this morning wasn't enough to move the markets, as the S&P 500 was down as much as 7.53 points before the FOMC release, but the Fed's predictable comments did trigger activity. The S&P 500 advanced 4.56 points just half an hour after the 2 p.m. EDT release.

"The actual numbers are just the latest figures to come out and we always know there's that next round of numbers," said Clifford Rossi, executive-in-residence and professor of the practice at the University of Maryland's Robert H. Smith School of Business. "The Fed is taking this big picture, long-term view."

He added that, typically, Fed comments will "trump the day's news unless there's something really, truly extraordinary" coming out of economic data releases.

The Fed has been tapering its bond-buying program, known as the third round of quantitative easing (QE3), by $10 billion with each FOMC meeting since December 2013, and this latest round of cuts sets the current pace of asset purchases at $25 billion a month. As the minutes from June's meeting suggest, QE3 will end in October with one final $15 billion reduction.

That will end a massive stimulus program that began in September 2012 under former Fed Chairman Ben Bernanke, aimed to help hold down long-term interest rates and kick-start a slowly growing economy. It began as a monthly purchase of $40 billion in agency mortgage-backed securities (MBS) and another $45 billion in long-term Treasurys, bringing the monthly asset purchase total to $85 billion. In its December 2013 meeting, the FOMC announced its intention to begin reducing these purchases by $5 billion for both the MBS and the Treasury securities, for a total of $10 billion in reductions.

Despite the Fed making the time frame for its easing policy more clear, it didn't offer the same clarity on interest rates…