FOMC Statement --Pushes Out to Late 2014 First Hike

The FOMC statement (see video from the Fed to the left or here) is slightly more dovish than expected and this has seen a knee jerk drop in the dollar and US equities bounce. These are likely to prove short lived moves. The key change was in the "exceptionally low rate" guidance. It has shifted from mid-2013 to at least late 2014. Many had expected the shift to mid-2014.

In a couple of hours the Fed will publish its anticipated Fed funds trajectory and the statement suggests the median is for the late 2014 period.

Outside of the late 2014 reference the bulk of the statement is nearly identical with the December statement. The Fed did not tweak its economic assessment and instead kept with the December wording that the economy was "expanding moderately". Inflation was said to be "subdued" rather than " has moderated". Of note the Fed calls its policy "highly accommodative".

Bernanke's press conference follows the release of the Fed funds forecasts. He is likely to stress that the Fed funds forecasts are not commitments/promises by simply forecasts based on the current information set.

Although the annual rotation of regional presidents to the FOMC appears to be in a more dovish direction, the dissent today came from Lacker, who objected to the reference to the time period that "economic conditions will warrant exceptionally" Fed funds rate.

As anticipated there was no mention of QE3 or an formal inflation target.