One message came out loud and clear after the latest Federal Reserve meeting: Investors will have to wait longer for any interest rate cuts this year. The Fed's first policy meeting of the year wrapped up Wednesday, with policymakers as expected leaving interest rates changed but starting to show a more hawkish consensus taking shape as the economic outlook improves. Central bank officials appeared to agree that growth and inflation are coming into better balance, removing the warning that there are "downside risks to employment" from their statement. Wednesday's view was in marked contrast to worries over the job market at the end of last year, which raised hopes for further rate cuts. Within the politics of the board itself, only two dissents emerged, from Trump appointees Stephen Miran and Christopher Waller. That suggests policymakers are building a consensus at a time when the central bank's independence has been thrown into question — and could potentially make any dovish attitude toward lower rates from the next Fed chair more challenging. Powell's term as Fed chair ends in May. "If jobs data doesn't soften from here, a March cut is unlikely — and May isn't a layup either," wrote Sonu Varghese, global macro strategist at Carson Group. "Just two dissents underscores how tight the consensus is, which means any new Fed Chair that comes in (after Powell's term is up) will have a hard time convincing other Fed members that rates need to go much lower, much less anywhere near President Trump's 1% target." What's more, easier financial conditions — from a stock market at record highs to a weak dollar — could help stimulate the economy even without the help of lower interest rates, reducing the need for looser monetary policy. "Right now, what the Fed is observing is that the markets are easing for them," Jim Caron, cross-asset solutions chief investment officer at Morgan Stanley Investment Management, told CNBC's Power Lunch on Wednesday. Market moves are "what the Fed is basically judging their policy actions on," Caron continued. Investors are still pricing in two interest rate cuts for later this year, but odds of a reduction coming as soon as March or April have dropped sharply, according to the CME FedWatch Tool . The central bank's benchmark overnight lending rate currently stands at 3.50% to 3.75%, and there are no Fed policy meetings in February or May. The S & P 500 was little changed following the Fed meeting Wednesday. The small cap Russell 2000 and equal weight S & P 500 lagged, falling 0.4% and 0.3%, respectively. — CNBC's Davis Giangiulio, Alex Harring and Pia Singh contributed to this report.
