The Federal Reserve releases its latest monetary policy statement Wednesday, July 27, after wrapping up a two-day meeting.
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“Today’s FOMC statement is another spin on the never-ending merry-go-round of Fed policy expectations in 2016”, Joseph Lake, director of global forecasting at The Economist Intelligence Unit, wrote in a research note Wednesday.
To Greg McBride, CFA, Bankrate’s chief financial analyst, the statement wording offers a clue as to what economists will be watching for in the next two months.
The Fed said at the end of a two-day meeting of its policy-setting Federal Open Market Committee that near-term risks to the US economy had diminished, a view that could open the door to a resumption of monetary policy tightening this year.
Since then, though, a resurgent USA economy, a bounce-back in hiring and record highs for stocks have led many economists to once again start looking for a rate hike.
To Alan MacEachin, corporate economist for the Navy Federal Credit Union, the no-go wasn’t a surprise.
Still, consistent economic progress in the months ahead could lead to a rate hike sooner rather than later – which would be great news for monetary policy officials but could complicate the lives of domestic and worldwide investors. It’s at 44% for December.
The labor market improved significantly in June as the economy added 287,000 new jobs, beating forecasts after just 11,000 were created the previous month. What if the Brexit impact proves to be limited in the United States?
But Bankrate chief financial analyst Greg McBride said the USA central bank can’t be in wait-and-see mode forever.
Fed officials gave more upbeat description of the economy.
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Despite weak job creation in May, the Federal Open Market Committee, which sets the monetary policy, said employment and economic growth had grown at a moderately since their mid-June meeting. “The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run”. Esther L. George, president and chief executive officer of the Federal Reserve Bank of Kansas City, was the lone dissenter.
US gold rose 0.9 percent to $1,338.7 an ounce.
The committee blamed low energy prices for weighing on inflation. Concerns about the economic impact of the United Kingdom referendum to leave the European Union, employment, and perhaps the market’s lack of desire for higher rates right now likely put the Fed on hold in July.
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“Overall, we’d say the Fed is buying time, and not trying to point the market toward an imminent hike, but our view of a hike by year-end seems on track”, said Kymberly Martin, senior market strategist at Bank of New Zealand.
