Tightening Bias Dropped As Expected, With Risks Seen In "Better Balance"

As expected, the January FOMC Statement changes remove the Committee's long-standing tightening bias, in favor of "considering any adjustments" to rates: "In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. "

• The inclusion of the assessment of the "balance of risks" echoes the December minutes' noting that the tweak in guidance at that meeting left "open the possibility of further increases in the target range if these were warranted by the totality of the incoming data, the evolving outlook, and the balance of risks."
• Though of course they're not talking about hikes this time - "adjustments" can be interpreted as downward as well as upward - and indeed the very next line uses the term "reduce", which is the first time in a long while we have seen that possibility in a Fed statement.
• The sentence "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent" underlines that the FOMC has not yet seen enough evidence to cut - but on the flip side, it means that it will be open to such evidence over the next couple of months until the March meeting.
• Elsewhere in the statement, the stale 2nd paragraph has been eliminated (as some analysts had expected), though Powell is likely to be asked about whether there is anything to read into the deletion of "tighter financial and credit conditions".
• Its replacement with "The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks" offers some justification for the shift into neutral, and echoes language that has been used multiple times before, by Powell and others.
• The 1st paragraph is modestly marked to market as usual, but the biggest potential change - altering the assessment that inflation "remains elevated" will have to wait for a future statement.
• Onto the press conference.