A “Dovish” FOMC

The “Exceptional” language was maintained by the FOMC after keeping rates on hold. A dovish meeting has US yields and the dollar sliding. This FOMC’s statement shows one major change from the December meeting, it now expects exceptionally low levels for FED Funds rate through late 2014. Basically, policy makers have extended their timeline by 18-months. Currently, futures prices see lower odds of an early 2014 hike, prior to the meeting it was at +20%.

The market had expected the SEP, out this afternoon, to see no tightening until 2014. This dovish report would imply that it would be late in the year. The vote was 9-1, with Lacker the one exception, refusing to give a time line.

Growth over coming quarters is seen as modest, with inflation running at levels at or below desired benchmarks. Operation twist remains in place and no fresh easing initiatives other than the ‘moving timeline’. This is clearly a dovish report allowing QE3 to remain on the table for sometime this year.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell