The Fed “surprised” market participants a little by voting to push the benchmark fed fund rate into a range between 0.0% to 0.25% — from its current level of 1.0%. This is the first time the Fed has ever used a “target range” to dictate short-term interest rate levels.

In their post-meeting statement policymakers said that they will “employ all available tools to promote the resumption of sustainable economic growth and price stability.”Nothing new there – central bankers have been pulling-out-all-of-the-stops in their effort to rekindle economic growth since the waning days of summer.

The Fed reiterated their intent to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets. This is stale news as well – the Fed was granted the authorization to purchase up to $500 billion of mortgage-backed securities in November. Chairman Bernanke a couple of weeks ago indicated the Fed would begin to make purchases of mortgage product before the end of the year. It now appears nothing of consequence will happen in this regard until next year.

There was a nice little knee-jerk rally in the mortgage market minutes after the rate cut was announced – but the early euphoria is slowly beginning to fade as investors realize that other than a nice little drop in overnight lending rates for banks – there is really nothing of consequence that has changed in terms of Fed policy.

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