The FED has spoken and “stay the course” is the phrase of the day. Following a unanimous 8-0 vote by the FOMC to leave interest rates unchanged, the USD is weakening across the majors. Intraday retracements from early strength have defined the immediate aftermath for the Greenback.

Talking Points

Today’s meeting of the FED is referred to as “dead,” in that it will not be followed by a presser. Written statements from the FOMC have been issued to the media and a few quotes are worthy of note:

• “Inflation on a 12-month basis is expected to run near the committee’s symmetric 2% objective over the near term.”
• “The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.”
• Near-term risks to the U.S. economic outlook appeared “roughly balanced.”
• Lagging Q1 economic growth was “noted.”

Add the verbiage up and what do you get? Growing inflation, sub-4% unemployment, and a strong chance of at least three rate hikes by December 31 of this year.

Future Path

In many ways, the FED kicked the can down the road today. After stating that inflation has hit their 2% target and is no longer a concern, they entertained zero chance of hiking rates. So, why the delay? If the stage is set for a rate hike, why not get the party started?

The answer is fairly complex and multifaceted. FED officials are hesitant to enter the realm of geopolitics, but related issues are the reasons behind maintaining the current status quo. Amid lagging Q1 GDP, new tariffs, and periods of extreme volatility in U.S. equities for Q1, the FOMC had no intentions of upsetting the apple cart today.

Simply put, the FED is currently in the business of following trends, not making them.

The consensus among economists is that rates will be raised at the June 13 meeting and again in September. Those two moves are expected, but the timing of a fourth rate hike for 2018 is the real wild card.