F_O_M_C Mixed Bag As Expected

Earlier this week and last night the thought was the F_E_D would remove "Patient" paving the way for a rate hike in June. While "Patient" was removed as widely expected, my thought was the F_E_D would also throw the market a bone to try to maintain some balance. They did this in a few ways, first by saying no rate hike in April , which was never an issue so they threw a bone that didn't mean anything, however they didn't rule out June which is what the removal of patience at this meeting was portending,a rate hike starting in June. No one talked about April and the F_O_M_C took April off the table so while it seems dovish and the market is knee jerking on the statement, it was a non-issue to start with.

The F_E_D Dot plot also moved down, so the market probably took some comfort from that.

However the biggies were an improvement from here in the labor markets and to feel reasonably sure that long run inflation would move toward 2% before they hike, not actually hit 2%, but that they felt confident it would move that way.


The F_E_D also downgraded language about the economy from last meeting's Solid pace" to this meeting's "moderate pace".

We expected the FE_D to throw the market a few Dove bones to distract from the removal of "Patient" and the market as usual is having a knee jerk reaction, BE CAREFUL with these as warned yesterday and before every meeting, they tend to be wrong. 

The bottom line is whatever else the F_E_D said, which I believe is widely used as a shock absorber for the market, they removed, "Patient" and re-introduced uncertainty in to the market, the market just doesn't recognize that yet, but it will very soon and they opened the door to a June rate hike, note they did not rule out June as they did April, but April was NEVER on the table.

NMow, watch the market very closely during Yellen's presser at 2:30, this is where you'll get some of the best data on market concerns and market reactions.

All in all, hawkish with a dovish facade thrown in to cushion the blow.