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The Federal Reserve Board has concluded its latest Federal Open Market Committee (FOMC) meeting within the past hour and, as we expected, held the line on interest rates and did not undertake any new monetary initiatives. That steadfast approach also was expected by most economists and stock market pundits.

Overall, the FOMC maintained that the nation's economy has continued to expand moderately. Specifically, it sees the labor market as improving, with the jobless rate declining in recent months. Also, it noted that household spending and business fixed investment have been gaining traction, but that the housing sector had remained depressed. Here, though, we believe that this troubled arena is in the midst of a long bottoming out process.

As for potential headwinds, the FOMC cited strains in the global financial markets and the increase in gasoline prices as dual threats to the continued up cycle in business activity here. However, the Fed also noted that U.S. economic growth seems likely to continue on a durable path. And to help ensure this prospective improvement, it would probably maintain the current exceptionally low levels for the federal funds rate target through 2014.

However, not everyone is on board. Indeed, a minority of FOMC members sees rates as likely to move higher next year, and an even greater minority expects rates to increase by 2014. As for future Fed intentions, the FOMC voted to maintain existing policies of reinvesting principal payments from its holdings in agency debt and mortgage-backed securities. That is, the Fed opted to stay the course rather that undertake an additional round of quantitative easing, as some equity market participants had been desiring. The Fed's vote on the meeting was nearly unanimous--with only one dissenter, Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant the present historically low level of the federal funds target through 2014.     

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.