The FOMC kept the funds rate steady, but lowered its forward guidance -- this is bullish for stocks, commodity prices and Treasuries (particularly shorter end of the curve), but bearish for the dollar.
a. The "dots" imply 2 hikes in the funds rate in the rest of the year to 1.0% by year end, rather than the prior 4 hikes. This is more than the subtraction of 1 dot to reflect not having hiked today.
b. It is still important that the Fed's forward guidance is now lower, even though it brought it closer to the expectations built into the Fed funds futures market.
The recent economic background gave the Fed an opportunity to bring the funds rate further away its "emergency" level. Fed officials did not take advantage of it.
The next FOMC meeting where a rate hike will be a risk is likely June.
a. But, the economic background may not be as supportive of a hike as now. One risk arguing against it is that the Core CPI and Core PCE Deflator could be held down in April and May as Apparel Prices unwind the earlier-than-normal introduction of Spring clothing that boosted the February CPI (and probably the March CPI, given bi-monthly sampling).
b. But, the risk of June hike could weigh on stocks and other markets as that meeting approaches.
The Central Tendencies were little changed from January's, with 2016 Real Growth and Inflation a tad weaker. The Fed still should talk up moderate growth and a gradual increase in inflation -- and not provoke concern about the US economy in the markets.
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