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Pisani: Fed does it again

The Fed does it again. The markets were terrified at the prospects that the Fed would remove the "patient" phrase. The Fed did exactly that, and yet stocks have traded in their widest range since January (roughly 41 points on the S&P 500,) 10-year bond yields have had one of the biggest declines since January, and the dollar has had one of its biggest declines in months.

The Fed accomplished this in two parts:

1) Slightly downgraded the economic outlook saying "growth has moderated somewhat" instead of saying "activity has been expanding at a solid pace."

2) Declared that an increase in the Fed fund rates "remains unlikely" for the April FOMC meeting, but in the next sentence declared that the Fed would not be raising rates until there is a "further improvement in the labor market" and they are "confident" that inflation will move back to toward their 2 percent objective.

In other words: the barrier to raising rates is still pretty high.

Here's the key sentence: "This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range."

At the press conference, she put this in even simpler terms, for those of us too stupid to understand the subtleties of the Fed's phrasing:

1) "Just because we have removed the phrase 'patient' it doesn't me we are going to be impatient."

2) There will be no rate hike in April, but "such an increase could be warranted at any later meeting depending on how the economy evolves."

3) We don't expect any sudden jump in inflation: "Inflation has declined below our long-term objective, and in light of the continuing appreciation of the dollar, we likely continue to do so in the months ahead."

What would Yellen look for in inflation? Seems wage growth pickup is the highest on her list, as well as the usual inflation indicators.

As for the slightly downgraded outlook on the economy, she hedged that statement as well in the presser, insisting "this is not a weak forecast" and that she continues to project above-trend growth and an improvement in the labor market.

You can have all the ideological debates you want about whether the Fed is behind the curve, but even the most advanced cynic has to admire the deft handling of a very tricky moment in the Fed's history.

As for Yellen, she just seems to be getting better and better in tamping down fear and anxiety. She is, as I said yesterday, the anti-drama Queen.

And she accomplished this with no dissent from any of her colleagues.

The downside to this is that the Fed has downgraded their expectations for the economy. GDP is lower. But the market is hardly howling its disapproval.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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