The Fed is more or less ruling out a V-shaped recovery.

'The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.'

'In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.'

While at first glance the statements look similar, there are some significant differences. In the April statement they referred to 'inflation could persist for a time below rates that best foster economic growth and price stability in the longer term' which is Fed-speak for deflation. The Fed seems to be indicating that deflation concerns are off the table.

They also have acknowledged the recent rise in commodity prices, most importantly for oil. This sets up a very real possibility for a big divergence between core and headline inflation. If this is the case, then being invested in the oil companies like Exxon (XOM) or deep-sea drillers like Transocean (RIG) would be a good place to be.

The resource slack is apparent in the labor market with an unemployment rate of 9.4% and rising, and in the industrial sector with record low rates of capacity utilization. The low capacity utilization figures means that one wants to avoid firms that make industrial equipment, like Ingersoll Rand (IR).

'In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

'As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.

'The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.