FOMC keeps door open to a March hike, market reaction muted

FOMC formally kept the door open to a March hike but did not communicate anything explicitly at this meeting. It was notable that the Fed was no longer willing to describe the risks to the outlook as balanced. A lot can still happen before its next meeting in March. Various US economic and inflation data is yet to be published until then.  The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. 

Market reaction post FOMC was largely muted. US front-end rates pared their pre-meeting gains and the USD lost ground as well. Equity markets also traded in the red in response to a less hawkish message. 

"Since the beginning of the year the US dollar has appreciated again notably, once again mainly against the EM currencies and once again caused by difficult developments in China. Should this trend continue the chances of a rate hike in March seem fairly low," notes Commerzbank in a research note.