The Fed took less action than expected: interest rates are now higher and stock prices lower than people at the end of last week expected them to be now.
Over the past year--the ten-year bond rate is half what it was at the end of last July. Back then we said that the long bond was pricing in three more years of liquidity trap depression followed by a rapid normalization of interest rates. Now what do we say? That the bond market is pricing in seven more years of liquidity trap and near zero federal funds rates?
An astonishing shift last August in market expectations about future inflation rates, interest rates, and output levels has been met with very marginal changes in policy on the part of the Federal Reserve.
It is probably the case that the desired tool would be fiscal policy--or banking policy, i.e. large-scale mortgage refinancings. But we are not going to get that, are we?
If further monetary steps are not necessary now, when would they be?
There has been no recovery in employment in the past 33 months: if a flat-lining employment-to-population ratio for 33 months does not trigger more aggressive action on the part of the Fed, what would?