By Ruma Dubey

This was expected to be a very routine, ho-hum kind of a Federal Open Market Committee (FOMC) meet. The first of 2015, the markets were watching the meet but really with bated breath. There was no Press Conference following the statement and all interpretations rose from this statement alone.

And the statement was just that – a non-event. Using the same buzzword as that in December, ‘patient’, dropping the earlier used word of ‘considerable time’, the Fed kept rates unchanged and kept the tone also same – dovish. In fact, it sounded more optimistic as the Fed expected labour market conditions to improve further, inflation to rise and meet target gradually and said that the economy is expanding at a solid pace. The Fed also warned that inflation is expected to go down further in the short term, mainly on the back of lower energy prices.

More importantly, the Fed pledged that there will be no rate increase, at least till June. The Fed acknowledge global risks, saying that it will take into account readings on “international developments” as it decides how long to keep rates low.

There are various dates floating around for the ‘expected rate hike’.  US based CME group does not expect it to happen before October 2015; Morgan Stanley says it would happen only in 2016 – between Jan and March’16.

Unemployment is at a six-year low of 5.6% and it added 252,000 workers last month, making it the biggest annual gain since 1999, showing a growth of almost 3 million jobs. Thus eve as Fed gets closer to its one target – full employment, the other one – inflation, remains elusive.

Everything really continues to depend on inflation and only inflation. Prices as measured by the Fed’s preferred gauge rose 1.2% in November from a year earlier and have been below the central bank’s target for 31 straight months.

This statement or should we say, no statement on rates this meet clearly sends one message across – rate hike is most certainly not on the agenda for the next two policy meetings in March and April.

The ECB last week launched its money printing to fight off deflation and in this scenario, when globally things continue to look dicey, despite US economy getting better, it was unlikely that Yellen would have hiked rates or even spoken about a timeline in this meet.

The Indian markets will brush off this as a non-event but it is surely one anxiety off the hook. It will continue to look for triggers within. The earnings season will see stock specific action and next week, it will watch Rajan’s policy. A rate cut has already happened so even that Policy on 3^rd Feb meet might be a non-event in that sense.  The big trigger now will be the Union Budget and the coming days could see the market entering the pre-Budget rally.

To read more into the Fed statement, here is the link - http://www.federalreserve.gov/newsevents/press/monetary/20150128a.htm