No more “considerable time” but “monitoring inflation closely”. It does use the word “patience” regarding the rates. This is a very balanced statement meant not to rock the boat.
Dollar initially stronger, but falls afterwards. It all changes with Yellen’s press conference:
- Yellen explains patience – USD rebounds
- EUR/USD loses a couple of support lines on Yellen’s couple comment
- USD/CAD forms double top amid bullish Yellen, bullish oil
- AUD/USD setting new 4 year lows on Yellen hawkishness
Here are some other key figures:
- FED forecasts 2016 – GDP growth at 2.5 pct to 3.0 pct, unemployment rate at 5.0 pct to 5.2 pct, core inflation at 1.7 pct to 2.0 pct –
- There are three dissenters: 2 hawkish and one dovish, all are non-voters. – this is balanced
- Here is the key part of the statement: “Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy” – this is dovish
- On employment: “Labor market conditions improved further, with solid job gains and a lower unemployment rate” – this is bullish
- Median outlook for end-2015 Fed funds rate falls to 1.125% – this is dovish
This is a highly anticipated meeting by the Fed: the first one after QE ended. The main focus is on the “considerable time” phrase related to the timing of the first rate hike. Some analysts were talking about a change to something along the lines of “patience”. Together with the statement, we have updated forecasts regarding inflation, employment and most importantly interest rate projections. At 19:30 GMT we have the press conference. It is basically a dilemma between strong employment and weak inflation, as the preview details.
The dollar was steady towards the release, with the exception of the euro that was sliding. Here is our live video coverage of the event:
— more detail later —