The Federal Reserve hiked the Fed funds target rate by 25 bp as universally expected, and signaled two hikes are likely to be appropriate in the second quarter. It was very close call in March, and here in June, one policymaker went from one hike to two. That is the source of the change. As Chair Powell indicated, most forecasts were unchanged since March.  

The FOMC is still looking at a terminal rate of 3.375% in 2020.  The path has been tweaked slightly in today's Summary of Economic Projections.  

The Fed upgraded its economic assessment, though it still sees the 4.5% as full employment. The rate currently stands at 3.8%. This appears to be a hawkish sign, suggesting that the Fed funds rate may have to go above neutral at some point. The FOMC statement is evolving in this direction. The assessment that rates would remain below long-run levels "for some time" was taken out of the statement.Still, the Fed describes its current stance as accommodative. The median forecast sees the Fed funds above the long-term average in both 2019 and 2020.  

As previously signaled, in order to strengthen its control over short-term interest rates, the Fed is raising the interest on reserves (and remember interest is paid on all reserves not just excess or IOER) by only 20 bp to 1.95%. Where effective average Fed funds trades relative to the range will be will be closely watched, and how other money market rates trade will test the efficacy of the Fed's steps.  

Powell indicated that a press conference would be held after every meeting starting next year. This has been talked about, and we think it will increase the actual flexibility of policymakers.  

The US yield curve flattened slightly and stocks weakened. Bank shares outperformed.The dollar has been weakening steadily through the session but recovered smartly on what was understood to be a hawkish statement.