The Federal Reserve kept the federal funds rate on hold at its latest meeting, with two members dissenting in favor of a hike. The notable shift in the Fed’s language was its characterization of economic activity as expanding at a “strong” rather than “solid” pace, indicating a more optimistic outlook. However, the Fed’s statement that “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal” wasn’t seen as an especially strong forward-looking signal.

Governor Cook’s dissent was a surprise, given her position as a member of the Fed’s leadership. Her hawkish stance on the forward-looking information suggests that she believes the Fed should be more aggressive in its policy stance. This contrasts with the constructive view of the activity backdrop expressed by Vice Chair Warsh, who justified the first hike.

The market’s reaction to the Fed’s decision will depend on how Chair Powell justifies the decision to stay on hold at today’s press conference. Will he provide further clarity on the Fed’s outlook and the factors driving its decision-making? Only time will tell.