“By guiding lower on inflation expectations as well as their median forecast, the signal for the market has now been shifted to a more dovish stance,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey. “Investors in a short term will look at it as a bullish signal for the overall market. It moves the Fed in a position of being more accommodative, which will soften the dollar.”

The Federal Open Market Committee kept the target range for the benchmark federal funds rate at 0.25 percent to 0.5 percent. The median of policy makers’ updated quarterly projections saw the rate at 0.875 percent at the end of 2016, implying two quarter-point increases this year, down from four forecast in December.

“The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen,” the FOMC said. “However, global economic and financial developments continue to pose risks.”

It is the third major central-bank policy event since Thursday, following an unprecedented stimulus package unleashed by the European Central Bank, and after the Bank of Japan held off from adding more to its record stimulus as officials gauge the impact of a negative interest-rate strategy adopted in January.

Traders responded to the Fed by lowering expectations for rate increases this year, as reflected by futures prices, according to data compiled by Bloomberg. Odds for a June boost to borrowing costs fell to 37 percent, compared with about 54 percent before the Fed’s statement and outlook.

David Fuller's view

The Fed’s December statement that there would be four quarter-point rate hikes in 2016 was rash.  It was a combination of wishful thinking and a desire to provide some forward guidance for markets.  However, all it did was strengthen The Dollar Index earlier this year, necessitating some surreptitious intervention to prevent a damaging breakout.  The ‘rule of thumb’ is that every 10% surge in the Dollar knocks 1 point off US GDP growth.

The Fed’s rational response on interest rates today supported Wall Street although it was widely expected. The Dollar Index eased and commodities firmed with Brent oil back above $40 and gold & silver steading within ranges.

Investors are less fearful following over four weeks of rallies since mid-February but they would like to see a further recovery by commodities and some mildly encouraging economic data from a country other than the USA.  Credit to New Zealand for obliging today and its stock market remains a world leader, albeit temporarily overbought in its fifth consecutive week to the upside.  A little more good news from other countries would be a tonic, including from commodity producers with credible governments.  However, be careful what you wish for. Higher commodity prices would counter deflation fears, push the Fed closer to its next rate hike and alert other central banks that inflation was showing signs of a modest recovery.