The Fed repeats the “patience” wording, worried about international developments and seeing the economy advancing. This is the key line: “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy”. However, it did upgrade the monetary wording about the economy to “solid”.
The USD is only marginally weaker, basically maintaining the previous trading ranges.
From the statement:
Information received since the Federal Open Market Committee met in December suggests that economic activity has been expanding at a solid pace. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; recent declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable.
No dissents this time. Fed watcher Hilsenrath writes that the Fed has held onto their patient stance on rate hikes.
The big reaction is seen only in the lonely loonie: USD/CAD breaks 1.25.
Also the kiwi falls on its own rate decision – they went neutral from hawkish.
The key parts are the Fed’s view of the economy and the wording about the timing of the rate hike. The key word was changed to “patience” last time.
This rate decision consists only of the rate statement. — more coming —
Since the December decision in which Yellen said a rate hike is coming in 2015 and she did not express worries about oil prices, there have been a few worrying signs about the US economy. However, the Fed’s two mandates have been OK: job creation is strong and core inflation is solid.
Valeria Bednarik and I are covering the event live. You can see it here:
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