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If you were looking for a major change out of the Federal Reserve’s decision on interest rates, the August 1, 2018 announcement might not have been the best bet to look for a big change. That said, the Fed did actually upgrade their economic views on employment, growth and inflation and that may be where the most attention needs to be concentrated.

The Federal Open Market Committee (FOMC) issued a statement on the August 1 two-day meeting noting that the labor market has continued to strengthen while economic activity has been rising at a strong rate since its June meeting. Along with strong job gains, the FOMC noted that both household spending and business fixed investment have grown strongly. Also noted was that both overall inflation and ex-food and energy inflation remain near 2 at the same time that longer-term inflation expectations are little changed.

More rate hikes are coming, but gradually. The FOMC has also said that monetary policy remains accommodative while the 2% inflation target remains. Wednesday’s vote was a unanimous 8-0 vote to keep the Fed Funds target rate steady in a range of 1.75% to 2.00%.

A secondary supplemental statement also addressed how the Federal Reserve balance sheet trimming efforts will continue to look. That statement said:

The Committee directs the Desk to continue rolling over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing during each calendar month that exceeds $24 billion, and to reinvest in agency mortgage-backed securities the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities received during each calendar month that exceeds $16 billion. Small deviations from these amounts for operational reasons are acceptable… The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency mortgage-backed securities transactions.

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Stocks had been gyrating between positive and negative throughout most of Wednesday ahead of the Fed’s announcement. It was not expected by the markets at all that a formal rate hike would be announced at this meeting, but there is still a debate on whether there will three rate hikes or four rate hikes for all of 2018.

The Dow was last seen down about 85 points to 25,328 and the S&P 500 was last seen down almost 4 points at 2,812.65. Also worth noting is that the yield on the 10-year Treasury note remained at 2.99%. This meeting was just one more reminder that the markets are likely to view the Federal Reserve as being only a part-time economic participant until it signals that monetary policy is now balanced and/or that rate hikes will be different from the “gradual” pace we have seen so far.