The first scheduled FOMC meeting of 2011 ended this afternoon, and the FOMC statement was very similar to December's statement. There remains no signs of future rate hikes. The Fed continues to use that same line:
exceptionally low levels for the federal funds rate for an extended period
Also, QE2 will continue without changes:
the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011.
There were only two minor changes. First, they added a note about increasing commodity prices when mentioning inflation:
Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.
Second, the vote was unanimous. Last year Thomas Hoenig was the lone vote against the policy at each FOMC meeting. Hoenig is no longer on the committee this year. At least two of the four new voting members are known as inflation hawks and have been critical of QE2. Either they're not as hawkish as Hoenig, or they didn't want to rock the boat by voting against the policy.
Future FOMC Meetings
If you want an idea about what the market thinks regarding when the Fed will start hiking rates, check out this CME Group FedWatch tool. It shows the probability of rate hikes in the future FOMC meetings based on the 30-Day Fed Funds futures prices. The probability of a higher Fed funds rate by November is shown to be 37.2%. That's down from 59.8% after the last meeting. The chance of a rate hike is 49.4% for next December and 70.2% for next January.
The next two FOMC meetings are scheduled for March 15 and April 26-27.