Nigel Gault, chief U.S. economist at Global Insight, said the statement is interesting because it maintains a balanced, flexible approach, yet still manages to tilt towards inflation concerns.

Eric Lascelles, senior rates and economics strategist at TD Securities, called it a "hawkish statement" but said it didn't shock the market as it was "largely what you'd expect."

Lascelles said the Fed appears to be taking a hawkish tone to keep inflationary expectations down and the U.S. dollar up. He said there's no indication the Fed is ready to pull the trigger and hike rates "anytime soon", but noted it's clear that inflation has become a bigger concern, as downside risks were said to be "diminished somewhat."

On growth, the Fed said "overall economic activity continues to expand, partly reflecting some firming in household spending," and also that "downside risks to growth remain" but appear to have "diminished somewhat," confirming Chairman Ben Bernanke's comments on June 9.

On rising prices, the FOMC statement said inflation is expected to "moderate later this year and next year," but also that "uncertainty about the inflation outlook remains high." Moreover, "the upside risks to inflation and inflation expectations have increased," the FOMC said.

Gault added that "the statement incorporates most of the things that Bernanke had already told us."

Dissenting from the decision was Dallas Fed President Richard Fisher, who opposed the past two decisions to cut interest rates as well.

"He's the most vocal of the hawks," Gault said, adding that it's good news that Philadelphia Fed President Charles Plosser went along with the prevailing opinion this time around, as two dissenting voices are "unusual" and would signal disharmony at the Fed.

Going forward, Gault said the Fed will have to continue walking a fine line between the dual mandate, as growth is expected to slow even more and inflation is expected to keep rising.

The FOMC statement also said "labor markets have softened further and financial markets remain under considerable stress," while noting that "tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters."

By Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it

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