The Federal Reserve took center stage in today’s market action, as everyone on Wall Street eagerly was anticipating the release of details of the Federal Open Market Committee’s (FOMC) so-called quantitative easing part II, or QE2. As expected, the Fed kept interest rates unchanged at near-zero levels, but to inject more stimulus into the economy, the Fed announced it would institute a program to purchase long-term Treasury bonds.

The money quote in the Fed’s statement today was the following: “To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.”

The over-under on the Fed’s QE2 was around $500 billion during the next six months at a pace of about $85 billion per month. Today’s announcement was basically in line with what most on the Street thought and, as such, the figures came as no real surprise.

Initial reaction to the Fed’s announcement saw the dollar slide a bit, while bond prices fell and bond yields rose. I suspect that this may be a case of selling the news when it comes to the Fed. I also suspect that we likely are to see a continued slide in the dollar and bonds. The likely decline in bond prices will come with a concomitant rise in bond yields, and that’s what I am going to be watching closely in the weeks and months to come.