With the heads of France, Germany and the IMF summoning Greek Premier George Papandreou for an "emergency" meeting in Cannes, the Fed meeting became something of an afterthought on Wall Street Wednesday.
Still, what the U.S. central bank says and does has huge implications for the global markets and U.S. consumers. So here's a breakdown of what the Fed did -- and didn't do -- and what it means for you.
Stuck at Zero: As expected, the Fed left rates unchanged near zero yet again, citing "low rates of resource utilization and a subdued outlook for inflation" in justifying these "exceptionally low" rates until at least mid-2013.
The Fed's zero interest rate policy (aka ZIRP) means borrowing rates should remain low for consumers looking to refinance a house, buy a car or establish new lines of credit. That is, of course, if banks are willing to lend. On the flip side, the Fed's ZIRP means bank CD rates will remain miniscule, punishing savers and anyone living on a fixed-income.
Economy Perking Up: While little was expected from the Fed, Ben Bernanke & Co. did have a few surprises for the market, most notably a slight upgrade in its view on the economy. "Economic growth strengthened somewhat in the third quarter," the FOMC declared. "Household spending has increased at a somewhat faster pace in recent months."
But Problems Abound: Still, the Fed cited "continuing weakness in overall labor market conditions" and an "elevated" unemployment rate, suggesting it's far from bullish on the economy and no doubt concerned about the potential for an external shock, most notably out of Europe. There are "significant downside risks to the economic outlook, including strains in global financial markets," the statement declared.
This combination of downside risks to the economy, high unemployment and a "subdued" outlook for inflation means the Fed is almost certain to remain on its current course when it comes to rates and Operation Twist, to which it reaffirmed its commitment.
Looking forward, the odds still favor the Fed doing more to help the economy (and the banks) vs. less, despite recent talk about QE3 being "off the table" during the market's big October rally. In fact, the other headline from Wednesday's FOMC meeting is the lone dissenter from the statement, Chicago Fed President Charles Evans, wants the Fed to take more action to stimulate the economy.
Looking ahead, the Fed is likely to stay on hold for the foreseeable future but ready to take further action to stimulate the economy and the markets should developments warrant, which looks more likely than not.
Update: Ahead of Fed President Ben Bernanke's press conference at 2:15 EDT, the Fed issued a downgrade to its forecast for GDP for 2011 to 1.65% from 2.8% previously. For 2012, the Fed now sees economic growth in the 2.7% range vs. 3.5% in June and at 3.25% in 2013 vs. 3.85% in June.
For unemployment, the Fed now sees unemployment as high as 8.7% next year vs. its prior projection of a fall to as low as 7.8% and predicts unemployment in the 7.8% to 8.2% range for 2013 vs. its prior forecast of 7% to 7.5% in June.
These revisions, downward to GDP and upward to unemployment, only reinforce the notion the Fed's next move is more likely to be additional easing vs. tightening its policy.