As always, for the best take of what the Fed was thinking, skip Hilsenrath and go straight to the people who provide it with its talking points. Here is Goldman's Jan Hatzius with hos post-mortem of the just released FOMC minutes.
Slightly Hawkish Tilt to July FOMC Statement
BOTTOM LINE: The July FOMC statement showed more of an acknowledgement of firming inflation and reduction in downside risks to inflation than we had expected. Changes to language on the labor market were mixed. Philadelphia Fed President Plosser lodged a hawkish dissent.
1. The statement's language was adjusted to indicate that inflation "moved somewhat closer to the Committee's longer-run objective," rather than "has been running below the Committee's longer-run objective." In a similar vein, the Committee now judges "that the likelihood of inflation running persistently below 2 percent has diminished somewhat."
2. Language on the labor market was upgraded slightly. "Labor market conditions improved, with the unemployment rate declining further," replaced "labor market indicators generally showed further improvement." However, the statement added new language indicating that "a range of labor market indicators suggests that there remains significant underutilization of labor resources," providing a dovish counterweight.
3. The pace of asset purchases will be tapered by a further $10bn/month (to $25bn/month) starting in August. In an accompanying statement, the New York Fed indicated that purchase distributions will remain unchanged, but the number of individual Treasury operations per month will continue to be reduced.
4. Philadelphia Fed President Plosser dissented to the statement, indicating discomfort with the "considerable time" language used to describe the expected delay between the end of QE and the first rate hike.