The much awaited Federal Open Market Committee or FOMC meeting is over. The action as expected was a pause and a long pause at that.

The FOMC statement said in three places it wants inflation to remain over 2 percent for a period of time before it changes its view.

It sees inflation at 2.4 percent this year, 2 percent next year and 2.1 percent in 2023.

Despite this, the FOMC believes the Fed rate of 0-0.25 percent is appropriate. As of now financial markets are still iffy and skittish with the US bond yields first falling then rising again.

Clearly there is a gap between how markets expect Fed rates to evolve and how the FOMC itself expects them to move.

Ultimately it boils down to how growth and inflation will pan out. Much also depends at what point the Fed will see the monetary loosening as sufficient?

Speaking to Latha Venkatesh, Chetan Ahya, MD of Morgan Stanley, said he expects a Fed rate hike in Q3 of 2023.

"The Fed will hold rates until 2023. We are expecting a Fed rate hike in Q3 of 2023. In the near term as they have themselves given the forecast that inflation will move up to 2.4 percent by end of 2021 but they are calling that as transitory. However we are expecting somewhat higher inflation in 2022 and we are also worried about the acceleration phase occurring in 2022. So there is a risk that the Fed could have to do tightening earlier than Q3 that we are forecasting right now," he said.

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(Edited by : Priyanka Rathi)