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Live blog: Reactions to Fed taper decision

Federal Reserve Chairman Ben Bernanke during the news conference after the Fed statement Wednesday
AP
Federal Reserve Chairman Ben Bernanke during the news conference after the Fed statement Wednesday

Editor's Note: In a move that stunned the markets, the Federal Reserve left its asset-purchasing program intact. Or, as everyone in the world puts it, they refused to taper.

Read: Fed: Taper off! Fed Keeps foot on the easy money pedal

We're following the reaction below.

(See how U.S. Markets are reacting to Fed news )

Live Blog:

4:25 P.M.: Fink points out another potential reason for the Fed to hold off—the risk of another ugly government shutdown fight that could cause the consumer to "pull back."

4:21 P.M.: Larry Fink, the CEO of BlackRock, said the biggest risk in not tapering was that the longer the program ran, the harder it would be to unravel.

"What I'm worried about now is the Fed is going to be buying maybe more than 100 percent, maybe 110, 120 percent of all debt issuance. I think that's going to create more of a bubble issue in the future and it's going to make it more difficult to unravel this," said Fink.

3:53 P.M.: "They're suggesting that, you know, we're in a decent economic period, but boy, we need to ratchet down where we've had an aggressive growth paradigm in the out years, so I think they're reflecting that," said Rick Rieder, managing director and chief investment officer of fundamental fixed income at BlackRock, which has $3.86 trillion in assets.

3:47 P.M.: "The stock market is going up because globally the economy is doing better than people think it is, and that's the surprise. The power of capitalism despite terrible policies," Fisher said.

3:37 P.M.: "I heard Bernanke say three things. One is they don't have confidence in the outlook. Second is financial conditions have tightened and they are concerned about that, and the third is about fiscal restraint," CNBC's Steve Liesman said. "It's very hard at this point to understand how the Federal Reserve gets to a place where it's happy enough with financial conditions."

3:36 P.M.: "I think we shouldn't be surprised. I was calling for at most a $10 billion cut," said Michael Yoshikami, founder and CEO of Destination Wealth Management, on CNBC. "I think we are way too wound up about how much tightening was actually going to occur, so I think this is really positive for the markets."

3:35 P.M.: "I wasn't convinced that they were going to do the tapering, but the markets certainly appeared to be. Now there's going to be the problem that given that there was no taper, that this might not actually be stimulative anymore," said Brian Jacobsen, chief portfolio strategist for Wells Fargo Advantage Funds, on CNBC.

3:31 P.M.: "Quantitative easing is an evil," Fisher said.

3:30 P.M.: "Let me say that I'm appalled. The market is rising, so I'm happy, but I'd much rather see the wicked witch of the East go away," said Ken Fisher, CEO of Fisher Investments, on CNBC.

"I think we would be way better off if we ended quantitative easing real fast so this scapegoat can get behind us. Quantitative easing is bad. It's not good. Bernanke is bad, he's not good."

3:24 P.M.: Hedge fund manager Lee Cooperman, who runs Omega Advisors, told CNBC's Scott Wapner following the Fed's decision not to taper its bond-buying program that stocks could continue to get a lift as a result.

"If the 10-year keeps rallying, so will stocks," Cooperman said.

He also said that bonds remain overvalued but warned that stocks are starting to look stretched as well, calling them "modestly overvalued."

"The idea that the economy is still too weak to taper and market goes up has its limits, Cooperman said. "If we keep going we are taking away from future returns."

3:21 P.M.: Probably the biggest news out of this press conference has been Bernanke's articulation of the view that the potential growth of the economy has diminished. That implies that the Fed has accepted something like "the new normal" that dour market watchers have talked about for some time.

3:17 P.M.: Bernanke: "I don't think we are complicating anything for future FOMCs. It's true that the assets we've been buying add to the size of our balance sheet, but we have developed a variety of tools and we think we have numerous tools to both manage interest rates and to ultimately unwind the balance sheet when the time comes. I feel comfortable that we can raise interest rates at the appropriate time, even if the balance sheet remains large for an extended period."

3:10 P.M.: Asked about the effectiveness of QE, Bernanke says it is difficult to get a precise measure. "My own assessment is that it has been effective," particularly in the most interest sensitive sectors such as housing and autos.

3:06 P.M.: Bernanke says debt limit and government shutdown did concern the FOMC. Both could have very serious consequences for the financial markets and the economy. He does say that the Fed would react and attempt to offset any shock but its ability to do so is limited.

3:03 P.M.: So does the Fed need an inflation floor as well as a target? Bernanke says that adding a floor could be a "sensible" addition to policy guidance. That's a potential major change.

3:01 P.M.: Bernanke says that "we should be very reluctant to raise rates if inflation remains below target." That provides grounds for being "very patient" when it comes to raising rates.

3:00 P.M.: Josh Zimmerman of Bloomberg News asks why the Fed has been overly optimistic about growth for the last few years. Bernanke answers that it appears that the potential rate of growth has been slowed, at least temporarily, by the recession and financial crisis. The Fed didn't anticipate that decline.

He adds that the Fed can't really raise the potential rate of growth.

2:56 P.M.: Bernanke says that the "equilibrium rate" that will achieve full employment will remain low but declines to specify when rates might return to a more normal 4 percent. Sometime after 2016.

2:51 P.M.: Steve Liesman asks about if and when Bernanke told the president that he doesn't want to serve another term as Fed chairman. Bernanke stiff-arms him, saying he won't talk about his plans.

2:50 P.M.: He also notes that most FOMC participants think rates will rise only slowly after that.

Jon Hilsenrath's question asks whether its right to read Bernanke as sounding less sure that the taper will begin this year?

Bernanke's answer emphasizes that its the overall condition of the labor market—and not just the unemployment rate—that will determine when the asset purchases will be reduced.

In other words: Yes, Jon. You are right.

2:49 P.M.: Bernanke points out that although the central economic projection of the FOMC includes hitting 6.5 unemployment in the fourth quarter of next year, 12 of the FOMC members think rates won't rise until 2015.

2:48 P.M.: Bernanke stressing that asset purchases are not on a preset course. "They are conditional on the data. They have always been conditional on the data."

2:47 P.M.: In fact, Bernanke said it is possible rates would remain unchanged until rates are "considerably below" 6.5 percent. That's seems to be a change (or at least a tweak) from the Fed's earlier statements, marking a looser monetary stance.

2:44 P.M.: Bernanke now talking about the forward guidance for interest rate policy. He points out that although the Fed has said it wouldn't raise rates before unemployment hits 6.5 percent, that level isn't a trigger for higher rates. Rates could stay low even as unemployment goes below that level, especially if inflation remains very low.

2:40 P.M.: Keep in mind, of course, that both Bernanke and the FOMC statement emphasize that there is no "preset course" for this.

2:39 P.M.: Importantly, Bernanke says the sense of the committee of the medium term economic outlook were close to the view it held in June. That likely means that the Fed still thinks it will be able to end QE near the middle of 2014.

2:36 P.M.: Bernanke: "Conditions in the job market today are still far from what all of us would like to see. Nevertheless, meaningful progress has been made in the year since we announced the asset purchase program."

2:30 P.M.: Fed Chairman Ben Bernanke has started speaking at the press conference. He is sticking very closely to the statement script.

2:28 P.M.: The Fed dropped language indicating that it could change the "composition" of QE. Which seems to say, it no longer expects the composition to change. So the Fed will keep buying a combination of Treasury securities and MBS.

2:25 P.M: The Fed also got specific about what it called "transitory influences" that were causing some jumbled inflation numbers in July. Now it specifically cites "fluctuations due to changes in energy prices." Translation: Inflation is still missing its target to the downside once you take away energy price changes due to global political turmoil.

2:23 P.M.: Pimco's Bill Gross: "This has been a handoff from the Bernanke Fed to the Yellen Fed—a Yellen Fed that is dovish with a capital D that tapers less fast, more slowly, that ultimately provides forward guidance and that keeps the policy rate at 25 basis points for a long, long time and that's why you want the front-end as opposed to the long Treasurys in a marketplace. That's why we've done real well today."

2:21 P.M.: The Fed's view of household spending and business fixed investment remains unchanged. Those two "advanced" since the last meeting, just as they had in July. But there's an additional note of caution about rising mortgage rates.

And the Fed reiterated it's long held view that "fiscal policy is restraining economic growth."

2:16 P.M.: "I think the reality is the economy is sending mixed messages and the reality is we have a lot of unknowns," said Diane Swonk, chief economist and managing director of Mesirow Financial.

2:15 P.M.: The Fed took note that the pace of economic expansion appears to be slowing by adding the word "moderate" as a qualifier in the first sentence.

2:12 P.M.: "I think it means we will get a taper later, I think it makes the press conference later on this afternoon even more important," Kelly said.

"This really muddies the waters. ... We are always going to have uncertainties out there and the problem is the Federal Reserve needs to express a certain confidence that the economy can actually sustain higher interest rates, which it can," Kelly said.

2:11 P.M.: Rick Santelli: "We're having a major steepening rally. ... The Fed is just going to keep doing the same and going further down the rabbit hole until they hit negative feedback loop."

2:09 P.M.: Another important line from the Fed statement:

"Asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook as well as its assessment of the likely efficacy and costs of such purchases."

2:07 P.M.: The statement notes that the Fed has observed "the tightening of financial conditions observed in recent months" that "if sustained, could slow the pace of improvement in the economy and labor market. "

2:03 P.M.: "There is a cost to keeping this easy money going, and in the long run I think we will look back on this day several years from now, when we are dealing with an inflation problem, and say the Fed ought to have [had] the guts to remove some of this monetary stimulus," Kelly said.

2:02 P.M.: "I think it's incredibly wimpy," said market strategist David Kelly on CNBC. "We are at the strongest vehicle sales since 2008, we are at the strongest housing sales since 2008. The economy is growing. ... If this economy is not good enough to take away the most extreme monetary ease in the century, then what economy would be?"

2:00 P.M.: Surprise. The Federal Reserve is not going forward with a taper. There was an immediate spike in stocks on the news.

Editor's Note: The Federal Reserve is expected to announce that it will begin to taper its extensive bond-buying program on Wednesday, a move that could potentially send the markets into a frenzy.

(Read more: It's Fed Day: Here's what to watch for )

The general consensus on Wall Street is that tapering will be modest, likely shaving $10 billion to $15 billion off the Fed's $85 billion monthly asset purchases. However, no one knows for sure how much the Fed will actually taper and if the cuts are more dramatic, it could mean a market sell-off.

(Read more: Finally, taper time is here )

If the Fed winds down its monthly asset purchases by $10 billion, the market will be "very, very happy," but any more than that and the market will be "very sad," said Goldman Sachs CEO Lloyd Blankfein on CNBC Wednesday.

(Read more: Blankfein: Fed should taper bond buying )

The Fed is expected to release its statement at 2:00 p.m. ET and Fed Chairman Ben Bernanke is expected to speak at a press conference at 2:30 p.m. ET.

Follow real-time market reactions to the Fed's announcement and Bernanke's comments here.

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