Immediate Reaction to Fed Statement and Bernanke's Discussion

The reaction to the Feds statement and particularly the Fed chairmans comments afterwards was dramatic. The equity markets sold off dramatically and the treasury market sold off with the 10-year note yielding 2.32% rising 12 basis points. Mortgage rates are likely to reflect the 10-year note sell off on Thursday. Mortgage rates are likely to rise at least 25 basis points as a result.

The change in language by the Fed that may have spooked the markets was the Feds description of the waning risks to the economy. This is different from previous language that described continued risks to the economy. Also, Mr. Bernanke was vague if not completely opaque regarding President Obama's comments to Charlie Rose of PBS just days earlier regarding his future with the Fed, which most expect to end when his term ends in January 2014.

Two Fed members (Bullard and George) dissented regarding the Feds policy.