Though the Federal Reserve was already considered dovish, the minutes from the March 18th decision to cut rates by three-quarters of a percent proved the policy group has grown far more pessimistic about the outlook for the world's largest economy recently. In the statement, the Board made sure to note deterioration in most of the major components of growth in recent data.

Starting with the business sector, officials noted a cooling in industrial production through February and an outlook for weak captial spending through the first quarter on the basis of sentiment reports. The housing market - the catalyst for the economy's recent downturn - recieved a similar bill of health, with the Fed seeing "little indication" that housing has begun to stabalize. The Fed reported demand for housing "continued to be restrained by tight financing conditions" leading to faltering sales and ballooning inventories. Far more concerning for dollar traders who have grown used to the crumbling fundamentals though was the wrap up for the consumer. The report touched upon "widespread" declines in hiring, cooler wage growth and depressed consumer sentiment, which in turn "stalled" real consuemr spending in recent months.

And, while these reflections were well known from the data that has crossed the wires over the past few weeks, the opinions and forecasts from the policy statement stood as confirmation to policy actions and individual policy members' speeches to the public. Overall, the Fed officials said their outlook for the economy had "weakened considerably." In fact, "many" members saw a contraction in GDP as "likely;" while a number of officials saw risk for a "prolonged and severe" downturn ahead. What's more, the statement had also made room for concerns surrounding the health of the financial market. The TSLF and Bear Stearns were mentioned, though not treated as efforst to avert impending market collapses as many analysts and traders felt they were. Furthermore, dampening confidence in the Fed's ability to cure the ails of the economy, they went on to acknowledge that monetary policy alone wouldn't address the problem in the housing and financial markets.

Despite all the dollar gloom in this summary and outlook though, there was a silver lining. For the policy group, the outlook for inflation to moderate over coming quarters offered some level of relief and confidence in pursuing a easing monetary policy. For traders on the other hand, optimism was born in Fed Presidents Fisher and Plosser's vote for a less aggressive shift in the benchmark lending rate. They felt the Board should throttle back the size of the rate cuts as the previous 225 basis points of easing had yet to show its full effect on the economy. Mr. Fisher further stated a belief that focusing on "measures targeted at relieving liquidity strains would improve economic prosepcts mroe quickly and lastingly" than further Fed Funds rate cuts. What's more, both raised concerns over inflation potentially coming unhinged as rates are lowered. Mr. Plosser specifically remarked that acting on inflation pressures when it was clear expectations were no longer anchored would be too late. And so, the Federal Reserve's difficult balance for monetary policy continues.

Antonio Sousa is a Currency Analyst for FXCM.