In December the USA central bank moved rates up from the target rate of between 0 and 0.25 per cent, which they had been at since November 2008. The lone dissenter was Kansas City Fed President Esther L. George, who favored raising the target range for the rate to 1/2 to 3/4 percent.
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But many analysts were looking for something that would indicate whether the FOMC might raise rates at its June 14-15 meeting, or whether it would remain more concerned about financial market turmoil and possibly the June 23 vote in Britain on Brexit, Britain breaking from the European Union, which many fear could disrupt markets.
“The Fed walked a fine line, but I think they did leave the door open for a June rate hike if the economic data drove them in that direction”, PNC Financial Services Group Chief Economist Stuart Hoffman said.
Rosengren is known for advocating a slower approach to rate hikes than most of his policy-making colleagues. June rate hike on the offing?
With the strong labor market of the US, some other minor concerns have also come to surface over which the Fed will keep its eye, for its next meeting.
The Fed didn’t rule out a rate hike at its next meeting in June.
Since past year, Yellen has tried to push a “data-dependent” approach in which investors and households develop their sense of Fed policy from the performance of the economy, rather than through central bank statements.
Treasuries surged, with 10-year notes halting their longest slide since 2014, as the Federal Reserve left interest rates unchanged and gave traders little reason to move up bets on the timing of policy makers’ next boost. The Fed said today it would “closely monitor” global economic and financial developments. Its statement said consumer spending has moderated even though incomes have been growing solidly.
On Thursday, the government is expected to estimate that the USA economy grew at a tepid annual rate under 1 percent in the January-March quarter. And as other central banks push interest rates down, that may dissuade rate increases going forward.
The S&P 500 index and Dow Jones Industrial Average ended higher for the day after the Fed statement, but the Nasdaq fell on disappointing earnings from Apple and Twitter late Tuesday, and the index has lost almost 5.0% in the past week. As oil prices hover near multi-year lows and the dollar remains markedly above its 2014 levels, long-term inflation has fallen under the Fed’s 2% objective in every month over the last three years.
But now it’s springtime, and it’s still clear that inflation is tame and growth isn’t great, thanks to the sharp downturn in China and other parts of the world.
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With many economic factors on the path to improvement, many are wondering why the Fed held off this month and when the Committee will actually follow through with one of the anticipated increases.
