The minutes from the Federal Open Market Committee's April 29-30 meeting supported market expectations that the central bank would leave rates steady at 2.00 percent when they meet again in June. Indeed, the minutes said that "most members viewed the decision to reduce interest rates at this meeting as a close call. The substantial easing of monetary policy since last September, the ongoing steps taken by the Federal Reserve to provide liquidity and support market functioning, and the imminent fiscal stimulus would help to support economic activity."

As we already knew, FOMC members Richard Fisher and Charles Plosser voted against the 25bp rate cut to 2.00 percent and "felt the Committee should put additional emphasis on its price stability goal at this point, and they believed that another reduction in the funds rate at this meeting could prove costly over the longer run."

Meanwhile, most economic conditions have developed as the FOMC expected, including "continued weakness in economic activity," though "financial markets remained fragile and strains in some markets had intensified." Looking ahead, the FOMC judged that economic growth would be "weakest over the next few months, with many participants judging that real GDP was likely to contract slightly in the first half of 2008." Furthermore, the FOMC was extremely bearish on the housing sector and "participants saw little indication of a bottoming out in either housing activity or prices." Consumption was also judged to be a soft spot for the US, and the "restraint on spending emanating from weakness in labor markets was expected to increase over coming quarters, with participants projecting the unemployment rate to pick up further this year and to remain elevated in 2009." Indeed, projections for the unemployment rate in 2008 were revised up to 5.5 - 5.7 percent from 5.2 - 5.3 percent. Likewise, real GDP forecasts for 2008 were slashed all the way down to 0.3 - 1.2 percent from 1.3 - 2.0 percent.

Clearly, the downside risks for the economy loom very large and conditions are widely anticipated to get worse before they get better. However, the FOMC also revised their inflation expectations higher, with PCE anticipated to hit 3.1 - 3.4 percent, versus January's estimate of 2.1 - 2.4 percent. As a result, the broad pick up in price pressures will likely be enough to prevent the Federal Reserve from cutting rates again in June.

Antonio Sousa is a Currency Analyst for FXCM.