The Fed didn't surprise anybody Tuesday. Sure, some will note that it's sounding a little more alarmed about inflation. The central bank noted in its statement that "the recent increase in oil and gasoline prices will push up inflation temporarily."
But before you can say "rate hike," the Fed went back to its usual script and said that it "anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate." In other words, the Fed statement was a yawn. Except for one minor thing.
I thought it was interesting to see why Richmond Federal Reserve president Jeffrey Lacker dissented with the Fed's pledge to keep rates low through late 2014. In January, when the Fed first extended the low rate promise from mid-2013 until the time of the next Congressional midterm election, the Fed indicated that Lacker "preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate."
In today's statement, the Fed noted that Lacker dissented because he "does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014."
That's a subtle but perhaps important difference. It's one thing to say you don't like the fact that the Fed was unwisely boxing itself in with an arbitrary target date for rate hikes. That was what Lacker suggested was the issue in January. He didn't want the Fed laying out a timeline. But now he is saying that he thinks rates should not be so low for so long. That's a sign that he must think the economy is actually getting better and won't need what may turn out to be six years of interest rates near 0%.
For now, he's the only one that thinks that way. It will be interesting to see if any other Fed members become willing to put down their dovish feathers and admit that the economy may actually be getting better and won't need "exceptionally low levels" of interest rates for that much longer.