Reacting to the Fed: Doves seen rising By Jeffry Bartash, MarketWatch WASHINGTON (MarketWatch) — The Federal Reserve on Wednesday left interest rates unchanged and took no further action to try to stimulate the U.S. economy, but the debate about what to do is far from over. The central bank itself is sharply divided. The one member who dissented from Wednesday’s decision, Charles Evans of the Chicago Fed, has previously said he wants to keep short-term rates at zero until the jobless rate falls to 7% from its current rate of 9.1%. Other Fed officials argue the bank has done enough. They say further measures could increase inflation, lower living standards and destabilize an economy suffering from unusually low growth. Complicating the matter is that the Fed has already reduced short-term interest rates to zero, using its most potent tool. Lately it’s bought billions of dollars of bonds to help bring down long-term rates, a controversial policy known as quantitative easing. The Fed has conducted two rounds so far, often referred to as QE and QE2. Here are some Wall Street reactions: • “The [Fed] statement played out as expected, but may be seen among those expecting something more decisive as somewhat disappointing.” — Eric Green, TD Securities • “We think the most interesting thing was support for stronger measures. For the first time there was a dissent on the dovish side. If you look at the wording, they left the door open for QE3.” — Peter Buchanan, CIBC World Markets • “The only dissent came from Chicago Fed President [Charles] Evans, who wanted more accommodation — now. Don’t worry, President Evans, I am sure you will soon get your wish.” — Stephen Stanley, Pierpont Securities • “We still believe any such action will be dependent on the economic data and, on our forecast of near-3% growth in the fourth quarter, we do not think that QE3 is likely in the months ahead, though we cannot rule it out.” — John Ryding, RDQ Economics • “The Fed continues to harbor its same own fears but offers no new policy. The waiting game is in full swing.” — Robert Brusca, FAO Economics Jeffry Bartash is a reporter for MarketWatch in Washington.

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