The Federal Reserve removed the word patience from the rate statement but wants to be confident on inflation before acting. They remain bullish on the job market, keeping the “strong job gains” wording. Housing remains slow and export growth has weakened. They explicitly state that the chances of a hike in April are low. The median forecast for the FFR at end 2015 is now 0.625, lower than 1%+ beforehand
The USD is weaker initially.
This is a key phrase in the statement that replaces patience:
The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range
The risks to the economy are balanced and international developments need to be taken into account. The economy has moderated somewhat.
The Fed has also published updated forecasts, in which they lowered GDP, unemployment and inflation.
The Federal Reserve was expected to remove the word “patience” regarding interest rate hikes, thus paving the way for a hike as early as June. Yellen’s recent testimony seemed to be a preparation for this, and the NFP may have cemented it.
The dollar was weakening against major currencies towards the publication.
The Fed also releases updated forecasts this time. In addition, Fed Chair Janet Yellen meets the press at 18:30 GMT to explain and answer some questions.Get the 5 most predictable currency pairs