Bond yields, which move opposite price, fell on the day, with the Fed-sensitive 2-year yield dipping to 2.49 percent. The 2-year had earlier risen above 2.52 percent, a more than nine-year high. Stocks moved slightly higher before giving back gains and moving lower on the day.
"The market doesn't want them to raise too aggressively," said Michael Arone, chief investment strategist at State Street Global Advisors. "That's one reason why, despite very good earnings, you're not getting the market moving higher."
Fed watchers had expected the Fed to acknowledge that inflation is moving higher, after lagging. The Fed did say inflation has moved close to its 2 percent target, and that it would take a symmetric view of inflation, meaning it expects it to run both below and above target.
The Fed also said it sees that household spending moderated from a strong fourth-quarter pace, but it said business fixed investment continued to grow strongly. In the same sentence, some traders read the business spending comment as hawkish and the household spending comment as dovish.
"In some type of Fed language, the fact is that they didn't signal a more aggressive path to tightening. That was the fear going in, and this is probably being interpreted as somewhat dovish," said Arone.
Several bond market pros who had expected four rate hikes said the statement did not change their view. But others were reassured the Fed was not ramping up market expectations for more rate hikes. The Fed is next expected to raise rates in June, and at that time it will release new forecasts for the economy and interest rates.
"People are latching on this comment the Fed took out of the statement. Last time, [they said] the economy has strengthened in recent months. Now that's gone," said Schumacher.
Schumacher said market expectations for further rate hikes were basically unchanged after the statement. "People looked at the statement, read it, Treasurys reacted for a few minutes, and not much has happened," he said.
He said the fed funds futures indicated 2.3 quarter-point rate hikes this year and after the Fed statement, the futures were barely changed.
The dollar index hit a new high for the year ahead of the Fed statement, and traded lower afterward but reversed course again.
"It's a continuation of what they're doing — they're still hiking," said Win Thin, senior currency strategist at Brown Brothers Harriman. Thin said the dollar's pullback was understandable after recent gains. The dollar index was up 0.1 percent at 92.45.