A spectrum of quotes about the Fed's acknowledgment that the economy is struggling.

Ethan S. Harris, an economist at Bank of America, said he was "mildly surprised" by the Fed’s action -- "not that they did it but rather how quickly they decided." He added, "My expectation had been that the Fed would take a little more time to switch gears and prep the market"

The decision not to let the balance sheet shrink was a relatively easy one, Mr. Harris added. "To go back to big asset purchases is a much bigger step, and it would require clear signs that the economy is heading toward a double-dip recession."

Economists who work in the markets had a mix of reactions.

Bruce McCain, the chief investment strategist at Key Private Bank, said the Fed "steered the middle ground."

"Given the uncertainty, hopefully the middle ground calms nerves and keeps people confident enough to go ahead and spend the money that they have in productive ways," he added.

But a former New York Fed economist, John Ryding of RDQ Economics, said the announcement suggested "a bit of a feeling of panic by the Fed." And Joshua Shapiro, an economist at MFR Inc., said the Fed’s announcement "appears to mainly be designed to provide itself with political cover against a backdrop of a gut-wrenching economic correction that shows no sign of ending anytime soon."

I see the Fed as blasé  rather than "panicked." From the Fed's press release yesterday:

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months.

Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.

Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls.

Housing starts remain at a depressed level. Bank lending has continued to contract.

Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

Measures of underlying inflation have trended lower in recent quarters and, with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.