If headline writers are a good indicator, the signal sent by today's statement from the FOMC was not ambiguous. From Forbes:
US dollar mixed Sydney morning; potential Fed pause weighs
US futures dealers sense rate pause on dovish FOMC
Fed signals pause in US rate rises
From Bloomberg:
Dollar Set for Quarterly Loss as Fed Near to End of Rate Rises
Stocks surge as Fed raises rates but softens its stance slightly
Fed Raises Rates, but Scales Back Talk of Inflation
Just in case I have not yet beat you senseless with the point, the Wall Street Journal's always excellent round-up of professional commentary begins this way:
Both the structure and language of the statement are more dovish... Ian Shepherdson, High Frequency Economics
What grabbed the attention of many was the shift from this language from the May meeting..
The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information
... to this language from today's press release:
Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Nonetheless, not everyone was convinced that the change in language means all that much. Returning to the commentary collected by the Wall Street Journal:
We look for the Fed to raise rates to 5.5% in the third quarter and then maintain rates at this level for a long period of time. -- John Ryding, Bear Stearns
We continue to look for the fed-funds target to peak at 6.00% near mid-2007... -- Joshua Shapiro, MFR Inc.
And there is this useful reminder:
... as was the case at the time of the May meeting, basically what the Fed does on Aug. 8 depends on the core inflation data. We have one month's data, the June figures for both CPI [consumer price index] and PCE [price index for personal consumption], between now and then. It feels like a 0.2% increase in core inflation accompanied by a trend-or-below second-quarter GDP reading might allow for a pause, whereas another high reading for core inflation will probably force another move. -- Stephen Stanley, RBS Greenwich Capital
The visual, from the Federal Reserve Bank of Cleveland's fed funds rate predictions:
Things do change, and change pretty quickly. Which will bring us immediately to tomorrow's PCE report.