Yellen & Co. say the right words for investors

The Federal Reserve today inched a bit closer toward raising interest rates, saying the gains in employment and the housing market appear to be sustainable. That was enough of a thumbs-up to send the main U.S. stock indexes surging, closing with the year's biggest one-day gains.

The Federal Open Market Committee (FOMC), the central bank's rate-setting group, has said for a while it would keep interest rates low for a "considerable time," which has never been precisely explained. The statement it released this afternoon following its last rate-setting meeting of 2014 maintained that zero to 0.25 percent target range for the federal funds rate, and really didn't change anything.

"Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy," said the Fed. "The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a 'considerable time' beyond the end of its asset purchase program."

Speaking to reporters in Washington after the meeting's end, Federal Reserve Chairman Janet Yellen noted that the statement didn't represent a "change in our policy" and was "fully consistent" with its previous statements. Yellen added that the "normalization process" for interest rates won't happen for the next couple of meetings. However, the Fed could act sooner if the data indicate action is needed. Conversely, it can slow things down if need be. Most observers expect rates to rise sometime next year.

"It doesn't really clarify the matter since we don't necessarily know what they are looking for in terms of inflation," said IHS economist Paul Edelstein in an interview, adding that the Fed is showing that it is "data-dependent" and not "time-dependent."

As for the Russian economy, the U.S. is well insulated against the economic meltdown that has sent the ruble plummeting in value compared with the U.S. dollar, Yellen said. She added that Russia accounts for less than 2 percent of U.S. trade volume.

The overall tone of the Fed's statement was positive, noting among other things that U.S. economic activity is expanding at a moderate rate, thanks to "solid job gains." Household spending is rising moderately, and business investment is increasing. While the housing market continues to recover at a slow rate, falling energy prices are keeping inflation at bay.

"The FOMC statement issued today had something for everyone but, on balance, it does not dissuade us that unexpectedly strong employment growth over the next few months will prompt the Fed to hike rates next March, sooner than most others expect," wrote Paul Ashworth, chief U.S. economist at Capital Economics, in a note to clients.

For today, though, investors were happy to dance to the tune the Fed is playing now.