Today's FOMC decision didn't necessarily break any new ground. The Fed saw a some improvement in overall labor market conditions, but the unemployment rate remains elevated. Overall the economy has been expanding moderately, notwithstanding some apparent slowing in global growth which is a change from the language used in the previous statement - economic growth strengthened.
The Committee continues to expect a moderate pace of economic growth over coming quarters.
That type of language - moderate growth - certainly doesn't signal that the Federal Reserve is ready to unleash another round of quantitative easing and would need to see deterioration economic conditions do so.
Therefore the USD gained on its rivals, with the EUR/USD hitting a fresh low for the day.
The Committee continues to expect inflation to settle over coming quarters at levels at or below those consistent with its dual mandate and it believes that the unemployment rate will decline only gradually towards levels of the committee judges to be consistent with its mandate.
Therefore we continue to see the FOMC primarily in a dovish position as it assesses the economy - acknowledging some improvement but keeping a guarded caution as about the downside risks from the Euro-zone crisis.
There was expectation that the Fed may try to unveil a communication strategy in which it targeted when it would raise rates based on key indicators like inflation and the unemployment rate. This move had been proposed by Charles Evans but was not mentioned in statement. We do see Mr. Evans continuing to dissent as he would like to see additional policy accommodation at this time.
The statement also did not the embark on any hints of quantitative easing which helped to boost the USD in the immediate aftermath of the release. We now await the change-over of voting members within the FOMC as we head outlined in our FOMC preview to a more dovish bunch and it seems that if economic conditions deteriorate the bar will be lower for monetary stimulus with the Hawks gone.