Unchanged: The Fed Stands Pat at 2%

In a 9-1 vote, the FOMC announced its decision to keep the Fed funds rate at 2%.

The FOMC said in a statement that the upside risks of inflation have increased. While downside risks for the economy remained, the statement read, those risks have moderated. Richard Fisher, who preferred a rate increase, provided the lone dissent.

The FOMC statement calmed fears that the Fed might make a more dramatic shift from monetary accommodation to monetary restriction in this meeting. In suggesting that overall economic activity continues to expand, and that household spending was "firming," the Fed has sent a somewhat more optimistic message than they had in previous statements about economic activity and downside risks.

The Bernanke Fed has lowered the Fed funds rate for seven consecutive times, taking the rate down from 5.25% in September 2007 to its current level.

The Fed statement did also indicate that inflation was likely to moderate "later this year and next", helping dampen concerns about dramatic rate hikes later in the year.

Stocks continued to move higher immediately after the announcement before 2:15 p.m. Eastern today, but began selling off shortly afterward. The dollar was lower against the Euro and yen.

We will have more analysis of the market's reaction to the FOMC decision in tomorrow's Trading Markets Battle Plan. If you are not a Battle Plan subscriber, please click here for a free trial to our daily, pre-market bulletin designed just for traders.