The Federal Reserve left the target range for short-term rates at 2.00% - 2.25%.  Markets had placed very low odds of a move at today’s meeting.

Here is a summary of today’s release:

Current conditions – the economy remains strong, but the Fed noted deceleration in the pace of growth in business fixed investment.  The recent round of GDP data saw fixed investment fall from the previous quarter and nonresidential spending increase only marginally.

Forward guidance – Today’s release supported expectations for an increase in rates at the Fed’s December 19th meeting.  The committee expects further gradual increases in the target range to be consistent with sustained expansion of economic activity.  Gradualism has been an important risk management tool of the Fed and appears to be defined as quarterly rate increases.

Policy – There was no change in the target range of 2.00% – 2.25%.  Some had speculated that the Fed would adjust the interest paid on excess reserves held by banks at the Fed to alleviate pressures that may be resulting from the falling size of the Fed’s balance sheet, but there was no change announced.  The committee voted unanimously to approve today’s policy “action”.

Gary Pzegeo joined the firm in 2007 as head of fixed income, focusing on portfolio management, trading, policy formulation and client service.