You read it first in the FT! The Fed did make a change to its key guidance on interest rates – even if it was only a baby step. Dare I say it I suggested this might happen, though in fairness I was far from certain the change would come at this meeting (in fact I hedged pretty shamelessly this morning!).
The shift was to identify the factors on the basis of which it expects to keep rates on hold near zero for a period of at least six months – the understood meaning of the “extended period” phrase.
Implicitly the statement also indicates that if these conditions are not met the Fed may have to raise rates within the six month period. So it is a form of what I called in my post this morning a conditional qualifier ie making it clear that the signal on the future path of rates is conditional on the forecast playing out in the expected manner.
Hawks can point to the reference to “subdued inflation trends and stable inflation expectations” as indicating red lines for rate policy. Doves will say this is obvious and changes nothing. Something for everyone, then.
Net result: to give the Fed a little more flexibility without signalling imminent rate increases. If the forecast plays out as expected and the conditions are met, the Fed will not be raising rates in the next six months.
But, the fact that the committee saw the need to tinker with the statement highlights that this is far from 100 per cent certain.