Next interest rate increase could come fairly soon

"Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon", the meeting summary stated, if data on jobs and inflation are "in line with or stronger than their current expectations".

Based on the central bank's most recent communication - the Fed minutes for the January/February meeting released on Wednesday - the members of the FOMC are still undecided about the ultimate effect of Trump's economic agenda, particularly fiscal stimulus, or if it will even happen at all.

Given their own inability to second-guess what effect Trump's policy changes might have on the United States economic outlook, Fed policy makers seemed to marvel that investors had adopted such an optimistic view of their likely impact.

Fed officials also anticipated "heightened uncertainty" from the Trump administration's plans for tax cuts and spending increases.

Overnight, US stocks ended mostly lower on the Fed's latest information, although the Dow Jones Industrial Average did record its ninth straight gain and ended 0.2 percent higher to 20,775.60 points. However prices firmed immediately following the release of the Fed minutes from the most recent FOMC meeting. Fed officials have forecast three rate increases in 2017 and two to three annually over the next couple of years. If you read between the tea leaves, they do not want to hike rates only to have to later halt.

Typically, the dollar appreciates when investors expect interest rates to rise more quickly because higher rates increase returns on dollar-denominated assets.

PAAMCO's Putri Pascualy referred to the minutes as "dovishly hawkish", but does not see a rate hike until closer to May or June.

Things are about to get interesting between the Fed and the White House.

Others cautioned that the policies and whether they will be implemented are still unknowns, and the meeting concluded with no action on rates, as the market expected.

The Fed officials also noted that consumer sentiment had moved up to an elevated level in December and January, while the downside risks in Europe had diminished somewhat.

Fed officials also generally agreed on the need to begin discussions at upcoming meetings on how to change the balance sheet re-investment policy.

Both of these policies, said Yellen, could produce drags on the USA economy and would factor into the decisions regarding monetary policy for the Fed as their effect became clearer.

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