A brighter economic outlook was not paired with any pulling-forward of rate-hike projections -- in fact the opposite. The FOMC is signaling via projections and upgraded forward guidance that it does not expect to raise rates even if the jobless rate hits 4%. When unemployment hit that mark during the last expansion, the funds rate was already above 1% and steadily rising.

The Fed updated policy guidance after adopting its new inflation-targeting framework. New guidance entails achieving both inflation and the full employment targets.

The Fed’s assessment of “considerable risks” surrounding the economic outlook over the medium term remained in the statement, signaling that officials have not taken much comfort from recent better-than-expected activity and labor market data.

The Summary of Economic Projections, which extended forecasts into 2023, included an upgrade to GDP growth in 2020 and a downgrade to the unemployment rate throughout the horizon. The lack of action on the fiscal-aid front likely led to less optimistic projections for 2021 and 2022. The fed funds rate central tendency forecast indicates rates remaining at the zero-lower bound in 2023.

​Assuming the economy rebounds by 28% annualized in the second quarter, as we project, U.S. GDP will need to grow by 3.4% in the fourth quarter to achieve the Fed’s forecast of -3.7% for the full year. This is slightly above our projections for growth of 2.5% in the fourth quarter and -4.0% for the year.

Eoin Treacy's view

The Fed is hell bent on ensuring deflation does not become entrenched. That means interest rates are going nowhere for years. Vaccines are likely to be permissioned in October and will be widely available early next year. As the economy opens up, cash-rich consumers are going to make up for lost time and will leap back into social activities. That will boost velocity of money reading from the incredibly depressed level it is at right now.

The primary reason the 2008 global financial crisis stimulus did not result in inflation was because the velocity of money did not recover. Banks chose to lodge the stimulus with the Fed in return for a guaranteed return instead of lending it. The main street lending program has not been deployed with vigour. However, its primary purpose is to circumvent the banking sector’s ability to decide on how and when to make loans. That’s a significant change and it signals the Fed’s clear determination to make sure they get the inflationary outcome they desire.