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FOMC Mentions Inflation Picked Up, No Change in Policy,

The  Federal Open Market Committee (FOMC) left policy unchanged, as expected, yet the tone about inflation is somewhat different. Instead of treating inflation as “subdued”, the wording is that inflation “picked up”.

The dollar is a bit stronger following the publication. EUR/USD is sliding in range, while USD/JPY is moving upwards. The moves aren’t big.

EUR/USD was trading  in the middle of the narrowing channel  towards this publication, around 1.32 and is now under 1.32.

The interest rate was left unchanged at 0-25%, and so was the conditional pledge to leave the rates low until late 2014. Once again,  Jeffrey M. Lacker was the lone dissenter that wanted to remove the “late 2014” pledge. The first paragraph of the statement contains the small change regarding inflation, but still contains the wording that longer term inflation is stable (emphasis mine):

Information received since the Federal Open Market Committee met in March suggests that the economy has been expanding moderately. Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.

This paragraph also contains a difference regarding unemployment: instead of “the unemployment rate has notably declined”, the wording is now “the unemployment rate has declined”.

So, mentions of more inflation and more unemployment can be extracted from the statement. As usual, changes in the wording are minor, but could be amplified by the markets.

Yet again, there was no hint of a third round of quantitative easing. Some analysts still expect Bernanke to throw a hint about QE3, perhaps in June, as Primary Dealers expect. Bernanke will start his press conference at 18:15 GMT.

The US economy isn’t looking as good as it did on March 13th, the last time the FOMC met, yet some indicators remain OK. The general picture of moderate growth continues. See the good and the bad things in the US economy.

His presser will be preceded by the release of the different members’ economic forecasts at 18:00 GMT.

See more details in the FOMC preview.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.