Markets Favor U.S. Dollar in Wake of Fed Meeting

NEW YORK (TheStreet) --  Markets were quieter just after the Federal Reserve's meeting, as market participants paused in order to filter the undertone of the U.S. policymakers' decisions. The question is how stocks and the economy will respond as the marketplace adjusts to comments from the meeting.

Even though Fed Chair Janet Yellen's comments on June 18 appeared to express cautiousness, the central bank's actions point to the opposite direction, as another chunk of the quantitative easing program was trimmed.

The markets initially reacted in favor of the U.S. dollar, and at the same time stocks fell. But that attitude was swiftly changed once Yellen began her press conference and talked down increasing inflation as "noise." She also reiterated the Fed's stance that interest rates would remain low for some time.

Wednesday's Fed meeting included no surprises, as the bank trimmed a further $10 billion off its monthly asset purchasing program from $45 to $35 per month. The ongoing tapering pattern is a projection to the markets of the Fed's belief that the U.S. economy is on its way to recovery in terms of unemployment and long term investments.

Although consumer price index data released last Tuesday were encouraging, the policymakers reiterated their opinion that inflation is lower than their overall target, and they are waiting for the upcoming personal consumption expenditures data for the first quarter of this year, expected for release on June 25, for further information. The Fed lowered significantly its GDP projections for this year from 2.9% to 2.2%, but left GDP projections for 2015 and 2016 unchanged.

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