THE DAILY CHART: A more mature Fed

Overnight the US Federal Reserve announced that it will reinvest maturing short-term mortgage-backed securities into long-term treasury bonds. As Karen Maley explains, this is a small step, but it's a primer for the US central bank to unleash another round of quantitative easing if America's economy continues to weaken. This chart illustrates the extraordinary transformation of the US Federal Reserve, from a traditional and relatively detached central bank with a balance sheet well shy of $US1 trillion, to a crucial pillar of the US economy with more than $2 trillion at its disposal, lending support in the short- and long-term.

Wall Street pared its losses on the announcement but still finished in negative territory. Seeing as though this small move by the US central bank was widely expected, a significant market reaction was always unlikely. Investors could draw some broader optimism from the announcement, namely that the US Federal Reserve is willing to once again adopt "unconventional" measures to prevent the American economy from slipping into a double-dip recession. But that has to be tempered with the less-appealing reality that Ben Bernanke and his Fed counterparts think the US economy could be in a spot of bother.