1. Economic activity was referred to as “has been expanding at a moderate pace.” That’s now changed to “expanded at a modest pace.” That’s a clear (not crystal though) reduction in the assessment of economic strength. The Fed further added that “during the first half of the year” to qualify when the expansion occurred.
2. Similar to the first point, the housing sector changed from “has strengthened further” to “has been strengthening.” The Fed went so far as to make note of rising mortgage rates in the policy announcement this time. This speaks to their ongoing cognizance of the issue even if it promises no action and understates the severity of the rise.
3. Last time the Fed said that economic growth will “proceed at a moderate pace,” but this time: “will pick up from its recent pace,” once again acknowledging the weaker conditions since last meeting.
4. Last time the Fed “anticipated that inflation over the medium term will likely run at or below it’s 2pct objective.” Things changed a lot this time, with the Fed saying they “recognize that inflation persistently below the 2 pct objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.” This signals their move toward a more defensive stance against deflation.
5. VERY subtle on this last point but the only other change was from “the committee EXPECTS that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens” to “the committee REAFFIRMED ITS VIEW” that the accommodative stance is appropriate. Again, this may not seem like anything (and it might not be), but a case could also be made that it’s a dovish shift in that the “reaffirmation” of the necessity for accommodation is more dovish than the “expectations” for same.
All in all, a dovish statement with nothing materially new brought to the table. Bond markets are marginally improved in line with the marginal increase in dovishness. In other words, 10’s are still above the 2.62 inflection point, but closer to it, having just now moved under 2.64 and production MBS are now down only an eighth of a point on the day. Positive Reprices are possible and even probable in many cases.