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The Federal Reserve Wednesday reaffirmed its policies to maintain low interest rates and purchase mortgage-backed securities until the state of the job market improves (a.k.a. QE3 or QE-Infinity)
In the statement following a meeting of its policymaking committee, the Fed said, "If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional assets purchases and employ its other policy tools as appropriate."
Related: Bernanke's Bazooka: Open-Ended QE3 is 'Very Aggressive'
Yahoo! Finance senior columnist Michael Santoli says it will be interesting to see how the Fed treats the (jobs) data if it uses the unemployment rate as a beacon for policy. "It's a volatile series and not necessarily historically the one thing the Fed hangs policy on," he says.
Neither the Fed in its statement or Chairman Ben Bernanke at his news conference mentioned the government's last jobs report which saw unemployment dropping to 7.8%--its lowest rate in since January 2009—while payrolls gained only 114,000.
The data is based on two very different surveys—one of households and one of businesses—but the big drop in the jobless rate from 8.1% was curious. Former GE Chairman Jack Welch even tweeted that the numbers were "unbelievable" and suggested the White House manipulated the numbers. "These Chicago guys will do anything….can't debate so change numbers."
Related: Jack Welch Is Wrong! 'It's Outrageous' to Say the Jobs Number is Manipulated: EPI's Mishel
In its statement, the Fed said the housing sector continues to show signs of improvement but growth in business fixed investment has slowed.
The Fed said it would continue its latest round of quantitative easing, buying $40 billion worth of mortgage-backed securities, ontinue to reinvest principal payments from those holdings and other agency debt, and extend maturities of its Treasury holdings on a monthly basis. Altogether that means increasing its debt holdings by about $85 billion a month.
"It's the new world of a steady state Fed," says Santoli. "Fed policy now is like methadone. It's maintenance."
Related: Everybody Hatest QE3: Bernanke Responds to Critics
And it's just what the market expected though there was a slight dip immediately after the Fed statement was released. Stocks closed slightly lower on Wednesday but not because of the Fed. Continued disappointing earnings reports—primarily on the revenue side pushed down share prices.
The Daily Ticker's Aaron Task says it looks like "the market can't count on the Fed for another bigger boost" and the rally from quantitative easing is history.
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