Gas pump prices are down another 18 cents for a gallon of unleaded since Fed officials met last month, according to the national average calculated by the American Automobile Association.
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Business Finance News believes that the Fed was careful to draft yesterday’s report.
New York Fed President William C. Dudley, the only regional Fed chief with a permanent FOMC vote, said January 15 that “in terms of the economic outlook, the situation does not appear to have changed much since the last FOMC meeting”, noting the stronger labor market. Some economists have said they now expect just two slight rate increases during 2016. As well as weekly jobless claims, traders have figures on pending home sales and durable goods orders to digest.
“I think broader financial market conditions do factor into the Fed’s decision about whether or not to raise rates, because financial markets can affect the real economy”, says Ryan Sweet, director of real-time economics at Moody’s Analytics.
The Fed is also trying to assess a shifting inflation outlook. Prices for U.S. Treasuries were mixed, while the dollar extended losses against a basket of currencies. It is essential right now to match the long-term securities levels with the interest rate policy.
In a statement issued after the end of policymakers’ two-day meeting, the Federal Open Market Committee said the federal funds rate would stay at 25-50 basis points, where it was set at the Fed’s December meeting. The committee noted that it’s “monitoring global economic and financial developments”. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
But stock futures pointed to a 0.5% opening gain for the S&P 500 on Thursday, as investors continued to digest the Fed’s views, and upbeat earnings from Facebook Inc. boosted sentiment. The Fed expected a strong growth in FY16, which it planned to follow by tightening the monetary policy.
Interest rates remain between 0.25% and 0.5% after being raised for the first time in almost a decade in December.
Indeed, even when markets began to suspect that the Fed might raise rates, the Dow Jones headed down.
The next FOMC meeting is scheduled to be held in March. At the same time cratering oil prices have provided yet another drag on inflation, possibly strengthening the hand of those who oppose aggressive rate hikes.
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Monday’s speech by Vice Chair Fischer is now the next focus point, when he will be able to say how anxious the Fed is about recent developments and hence help shaping rate expectations. The threat of a global downturn and a financial market selloff is putting pressure on Bank of Japan policy makers to loosen their policy at their meeting Friday. Since the Fed raised rates on December 16 from record lows, stock markets have plunged, oil prices have skidded, and China’s leaders have struggled to manage a slowdown in the world’s second-biggest economy.
