As expected, the Fed maintained their policy stance yesterday in their first meeting of the year and left interest rates unchanged.  The statement noted that the Fed expected ‘only gradual increases’, given their current economic outlook.

The statement revealed their softer view on economic activity by removing its reference to economic activity ‘expanding at a moderate pace’ and noted the slowdown in growth late last year.

The also took out the statement that they viewed the ‘risk to the outlook for both economic activity and the labor market as balanced’ and added that it would be ‘closely monitoring global economic and financial developments as it assesses their implications for the labor market and inflation.’

They also continued to note the shortfall in inflation, citing energy prices and non-energy related import prices and said that they would monitor the progress of inflation to their goal ‘carefully.’

After evaluating the report, markets drove the odds of a hike in March lower, as indicated by fed fund futures.  A month ago, they thought that there was a 52 percent chance of a hike in March, but had fallen to 34 percent before the statement.  After the statement, the odds stood at 29 percent.