CNBC Fed Chief Ben Bernanke Testifies to House Budget Committee

The Federal Reserve’s statement reveals that the Fed believes the economic recovery is growing stronger, the labor market is improving, and inflation is creeping back.

Gone was the most negative language about labor market conditions. But gone also was the conclusion that measures of underlying inflation were headed downward.

Back in January, the Federal Open Market Committee said that although the economic recovery was continuing, the improvement was “at a rate that has been insufficient to bring about a significant improvement in labor market conditions.”

Today, the FOMC changed its tune. The economic recovery is no longer just "continuing"—it is "on a firmer footing. What’s more “overall conditions in the labor market appear to be improving gradually."

At the same time, inflation has crept back into the FOMC’s analysis. Back in January, the FOMC described measures of inflation as "trending downward." They’re no longer doing that. These days they are trending up, although at a "subdued level."

The Fed didn’t take any notice at all of recent events in Japan. It did note increasing commodities and energy prices.

"The recent increases in the prices of energy and other commodities are currently putting upward pressure on inflation. The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations," the statement said.

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