The FOMC comments on the economy was about the same as in the Dec meeting and they remain dovish on inflation as while they acknowledge that “commodity prices have risen, longer term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.” The Fed continues to partially dictate policy on the CPI and PCE as their gauge without much focus on market signals. Of course the Fed doesn’t want to stop their $600b purchase program until its over so thus needs to craft a statement that confirms their reasoning for it and they seem to have successfully done that. Fisher and Plosser did not dissent and therefore didn’t follow in the foot steps of the departed Hoenig as some speculated they would based on their publicly stated uncertainty with QE2. The real fireworks for markets in 2011 will come as we approach June 30th and thereafter when QE2 is done.
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