They only mention worldwide developments as part of the considerations but not as a risk.
Advertisement
Officials omitted an assessment of whether the risks to the outlook were balanced or not for the third straight meeting. A description of those risks as “nearly balanced” would have provided a clearer indication that a rate increase in June was more likely, economists have said.
Fed officials highlighted that labor market conditions have improved further, even though “growth in economic activity appears to have slowed”. It said household spending has moderated but income has risen and consumer sentiment “remains high”.
Inflation, meanwhile, remains below the Fed’s target, partly because of low oil prices and a strong dollar, the Fed said.
Indeed, since the Fed has hit the pause button on its own rate hike plans, the dollar has retreated from the highs it reached at the start of the year.
Many investors are looking to how the Fed describes the so-called balance of risks to the USA economy for clues on whether it is inclined to raise interest rates.
The FOMC said while the domestic market has improved further despite a recent economic slowdown, global economic headwinds remained on its radar. The stronger dollar has been a drag on the U.S. economy by hurting exports and widening the trade deficit. A strong dollar makes USA goods costlier overseas.
The Commerce Department is expected today to estimate that the USA economy grew at a tepid annual rate under 1 percent in the January-March quarter. Growth slowed in March, for example, but employment picked up. It said such key sectors as consumer spending, business investment and exports have weakened.
Far from considering rate increases, other major central banks are weighing steps to further ease credit, increase inflation and bolster growth. Economists had expected pending sales to rise by 0.5 percent. Experts say with USA interest rates still close to zero, the Fed is concerned it would have to rely on more unconventional policy tools should the economy take a turn for the worse.
With the strong labor market of the USA, some other minor concerns have also come to surface over which the Fed will keep its eye, for its next meeting. Given that the central bank will be reluctant to move towards a rate hike in September just prior to the presidential election voting, a June or July hike look more of a possibility now. Boston Fed President Eric Rosengren argued earlier this month that the economy’s moderate pace of growth will continue.
Advertisement
In quarterly forecasts submitted in March, the median projection from FOMC members was for two quarter-point interest- rate increases in 2016, down from the four projected by the median forecast in December.
