Fed doesn't surprise but changes to the outlook were interesting

By FXstreet.com | June 18, 2014 AAA

FXStreet (Guatemala) - Despite the CPI surprise that came in yesterday for the US with the May headline CPI that came in stronger than anticipated, greater than 2%, the Board of Governors of the Federal Reserve made its decision this month to leave rates at 0.25% as widely expected.

They will continue to taper at $10B to $35B from $45B also as expected. The decision was accompanied with a slightly better economic statement with two new members at the board contributing which may be effecting the shift in the Feds outlook. The dot charts were significant and changes in the Unemployment rate suggest the Fed are optimistic looking forward. The GDP forecast for 2014 was however revised down to 2.1 to 2.3 but no changes in 2015 or 2016.

Overall, in fact, this outcome isn't particularly giving us the indication that the Fed are indeed deviating from their set course of action. Only 1 FOMC member would call for a rate hike this year while 12 call for one in 2014 and 3 in 2016. We now await the Fed’s Monetary Policy Statement and press conference and the take-away from here will be whether Yellen is sufficiently concerned about the rise in core inflation to signal that rates could start to rise sooner than expected and whether she is getting closer to her overall targets.

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