Fed Bullish, Not Dovish

The Federal Open Market Committee's decision Wednesday to keep the overnight borrowing rate steady at 5.25% was no surprise. But the tone of the accompanying policy statement was a startling change of pace for the central bank, and a welcome relief for the financial markets.

The FOMC altered its depiction of the current economy to acknowledge both the strong growth that took shape in the fourth quarter of 2006 and lower inflation readings. The stock market rallied sharply when the statement was released and traders assessed it as less hawkish than expected.

"This is kind of like the best possible Fed statement you could get without a major change in the fed funds rate," says Art Hogan, chief market analyst at Jefferies & Co. That makes it bullish, but not dovish, he adds. "We have to characterize this as having a tightening bias." ...