At first glance, it felt like nothing much was said at the Federal Open Market Committee meeting concluded Wednesday. But, taking a step back, you could form a very different impression.

A lot has transpired since December when the Fed raised rates by 25 bases points. Let's put ourselves in the Fed's shoes.

Prior to the December rate hike, the Fed had been preparing the markets for its decision. Now that that's over with, it's continuing to prepare the markets for further decisions. 

The statement read very neutral, slightly leaning dovish. It basically said that the Fed will assess national and global developments and how its decisions might impact future inflation and employment. It weighed the positives and the negatives of the economy in general.

This was the Fed's way, in my opinion, to start the process of walking back the expectation of future rate hikes and the pace. As we get closer to March, we will hear more chatter about the likelihood and the number of rate hikes diminishing. As a result, the bond market will start pricing in lower rates, helping the Fed out along the way. Eventually, the talk will go from how many hikes, to no hikes, to possibly cuts, and, finally, to negative rates.

Taking a more global view, in the not-too-distant future, the U.S. could begin to explore a negative interest rate policy. The European Central Bank and now the Bank of Japan have negative interest rate policies in place. The Fed's prior stance of higher rates no longer seems to be in sync with what the other two major economies. Therefore, rates are most likely headed lower here in the U.S. also. Tie in a weak GDP number that was published on Friday, the direction of future rate policy will be lower.

Perhaps one tool the Fed has left in its bag of tricks is not tied to interest policy or increasing the balance sheet. It has two mandates, one being employment, the other being inflation. Perhaps the Fed could change its inflation target from, say, 2% to 5%-to-10%. Economics is not a morality play. In the absence of fiscal policy could inflation be a shot in the arm of the U.S. economy?

This announcement in my opinion was the start of a more dovish Fed. It downshifted to Neutral and now it will begin to talk the rates down over the next several weeks. This will cause expectations in the market to shift to lower rates and quite possibly a fourth round of quantitative easing.

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