In their March statement, the U.S. Federal Reserve (Fed) stood pat on their policy of unlimited QE. In fact, the Fed’s “dot-plot” showed that no rate hikes are expected until 2022 at the earliest. As expected, the U.S. indices took the news as a bullish indicator. On the close, the DJIA (+189), S&P 500 SPX (+12), and NASDAQ (+54) all settled in the green. For the DOW, today marked the first time in history the 100+-year-old index closed a session above 33,000. 

On the other hand, the Fed certainly didn’t do the Greenback any favors. Following the statement, the EUR/USD (+0.64%), USD/CAD (-0.31%), and USD/CHF (-0.23%) all moved against the U.S. dollar. In a Live Market Update from earlier today, I outlined a buying opportunity in the USD/CHF from 0.9254. The trade turned out to be a miserable loser as the bearish sentiment generated by the FOMC’s announcement sent the Swissy toppling by an immediate 40 pips.

March 17 Fed Statements: Highlights And Recap

This afternoon’s release from the Fed gave us a fairly clear picture of what they have in mind for the coming 9-12 months ― more QE. Several bits of information from the March FOMC dot plot projections reiterated this notion:

• Most FOMC members expect rates to be held at near-zero through 2023
• Only four of the 18 FOMC members anticipated a rate hike in 2022, up from one last December
• For 2023, seven members see a single rate hike being instituted, up from five last December
• The Fed expects real GDP to grow by 6.5% in 2021, up from 4.2% previously
• 2022 real GDP estimates were raised to 3.3% from 3.2% previously
• Fed projections say the unemployment rate will fall to 4.5% in 2021, down from the previous estimate of 5%

Right now, one of the most important issues is inflation. We are beginning to see consumer and producer prices rise and the FOMC believes that this trend will continue. The central bank now views inflation hitting 2.4% in 2021, well above previous estimates of 1.8%. Also, inflation is projected to come in at 2.0% for 2022 and 2.1% for 2023.

Bottom Line: Right now, the U.S. Federal Reserve is committed to unlimited QE and rock bottom interest rates. And, this doesn’t look to change anytime soon. However, one has to wonder exactly what 2.4% inflation will look like. Remember, the Fed adopted a 2% average inflation model last summer ― while this is a positive for equities and commodity valuations, the USD will likely take it on the chin.