Fed rate review: United States central bank sending out mixed message

The greenback is approaching the 110 yen level not seen since FebruaryMore

Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low.

The biggest development in the statement, however, was a tweak in the Fed's language with respect to inflation.

As the central bank in the world's largest economy, the Fed has the power to change interest rates across the world by tweaking its own base rate, meaning that the FOMC's decisions are watched closely.

The Fed has a goal of 2% price inflation. On Wednesday, the Fed left rates unchanged but said inflation has moved closer to its 2-percent target.

"The story in the last few days has been the disappointment over the European Central Bank and the United Kingdom to start raising interest rates in the wake of the Fed and unless we see data picking up meaningfully, the dollar will outperform in the coming weeks", said Gavin Friend, senior markets strategist at NAB in London. Excluding food and energy, prices rose by 1.9 percent in March, higher than the 1.6 percent seen in February, according to the Journal. The Fed has been predicting inflation would pick up for several months after it unexpectedly fell in the latter half of 2017. More importantly core inflation fell back to just 0.7% year over year from 1.0% year over year. Looking at US Treasury bond yields, the 10-year is now flat and yielding 2.973%.

It rose to as high as 92.57 on Tuesday, its firmest since January 10.The index rose above its 200-day moving average for the first time in a year, triggering a wave of short-covering.

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This statement is a far cry from concerns that the recent tax reform would generate higher inflation and force the Fed's hand in the pace and scale of interest rate hikes. The Fed also removed a sentence from the March statement which said, "The economic outlook has strengthened in recent months". Still, the January-March period was the fourth consecutive quarter of growth above 2%, the second-longest stretch at that pace since the 2008 financial crisis.

Markets have already priced in two more rate hikes for the year - one in June and the other one in September.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. "The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate". "Inflation on a 12-month basis is expected to run near the Committee's symmetric 2 per cent objective over the medium term", officials said, adding that the risks to the outlook were "roughly balanced".

"I think the economies are strong enough in those countries to keep central banks on track to keep normalizing monetary policy", Nelson said.

Policy makers aim to keep inflation near target while ensuring maximum sustainable employment and preserving a U.S. economic expansion that is now the second longest on record.

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