The BottomLine: While the Federal Reserve has looked beyond recent data disappointments, the failure to see better growth in the second half could put additional rate hikes on hold and delay the start of balance sheet reductions. "But shrinking balance sheet would boost the dollar in the long run", the trader said, noting the Fed's plan to reduce its portfolio would "inevitably" pile pressure on the Chinese yuan.
In a statement it said: "The committee now expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated".
US stocks opened lower Thursday as investors continued to digest the Federal Reserve's decision to raise interest rates by a quarter point.
The Fed has now raised rates 4X as part of a normalization of monetary policy that began in December 2015.
The data on Wednesday showed USA consumer prices unexpectedly fell in the month of May and retails sales recorded their major drop in 16 months and this has raised questions about the bank's future progression.
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U.S. 10-year Treasury yields were last at 2.134 percent, below their USA close of 2.138 percent.
The central bank cut its inflation forecast for 2017 to 1.6 per cent from 1.9 per cent as measured by the PCE index.
The Fed said a recent softening in inflation was seen as transitory, but the latest tepid price readings made investors question its view that the United States economy is continuing to improve.
They lowered projections for 2017 to 1.6% from their March estimate of 1.9%.
The U.S. central bank is scheduled to release its decision at 1800 GMT on Wednesday with a news conference to follow from Chair Janet Yellen.
The rise was widely expected, but Fed policymakers suggested they would raise rates again later this year despite signs of cooling inflation.
All of this negative data is causing growing speculation that the Fed. may have got it wrong and the economic slowdown is not "transitory" as they have claimed on numerous occasions recently. The Fed plans at least two more rate hikes this year. Only Neel Kashkari, president of the Minneapolis Fed bank, opposed the increase.