To the surprise of virtually no one, the Federal Reserve kept its cheap-money policy in place and pledged to continue pumping $85 billion a month into bond purchases until the economy improves.
Wall Street had expected the Fed to refrain from tapering its so-called money printing operation. Economic data, particularly in employment and consumer confidence, has weakened over the past two months, giving the U.S. central bank cover to continue unabated.
Where once the market had expected a retreat on quantitative easing to begin before the end of 2013, consensus is now that tapering won’t begin until at least March 2014.
The Fed’s Open Market Committee cited economic instability as the primary reason for continuing the status quo, which also entails a near-zero level for its policy interest rate.
“It’s clear the catalyst needed to even discuss tapering again will have to come from significant improvement in the labor market,” said Todd Schoenberger, managing partner at LandColt Capital.
The Fed has been using the unemployment rate as a benchmark for guiding monetary policy. The rate has been on a steady decline and now stands at 7.2 percent, but much of the move has come to a shrinking labor force rather than robust job gains,.
Moreover, recent reports have indicated a softer market, with the ADP count of private jobs for October showing just 130,000 new positions.
Language in the October statement mirrored the “moderate pace” of economic improvement that the Fed saw at its last meeting in September.
The stock market came off its lows following the announcement and the 10-year Treasury yield briefly jumped, but both measures settled a few minutes later.
In a departure from the last statement, central bank officials noted that the pace of housing recovery “has slowed” and they warned again that “fiscal policy is restraining economic growth.
The statement, though, did omit a reference from last month that fiscal tightening could slow growth in jobs and the broader economy.
—By CNBC’s Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom