New york stock exchange trader federal reserve tapers monetary policyREUTERS/Lucas JacksonTraders listen to an announcement by the U.S. Federal Reserve on the floor of the New York Stock Exchange in New York December 18, 2013.

Stocks were just barely in the green ahead of the Federal Reserve’s FOMC announcement. But they fell into the red after the statement was published.

And now they’re deep in the red.

The Dow is down 161 points.

The S&P 500 is down 19 points.

The Nasdaq is down 44 points.

During the Q&A of her press conference, Fed Chair Janet Yellen was asked to clarify what the Fed meant by the “considerable time” betweent the Fed’s asset purchase program and the first increase in the federal funds rate.

Yellen said it might be around “six months.”

At that moment, the market sell-off really accelerated. Six months is an unexpectedly exact and short period of time.

The Brookings Institution’s David Wessel called it “Yellen’s first mistake.

In its statement, the Fed said it will no longer use the 6.5% unemployment rate threshold as part of its forward guidance for when it will eventually begin to raise rates. This was part of the “Evans Rule.”

“With the unemployment rate nearing 6-1/2 per cent, the Committee has updated its forward guidance,” they said. “The change in the Committee’s guidance does not indicate any change in the Committee’s policy intentions as set forth in its recent statements.”

As expected, the Fed announced further tapering of its asset purchase program (aka quantitative easing). “Beginning in April, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $US25 billion per month rather than $US30 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $US30 billion per month rather than $US35 billion per month.”

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