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No Policy Changes at Fed Meeting - Door Is Still Open for a Rate Hike Later This Year


No Policy Changes at Fed Meeting - Door Is Still Open for a Rate Hike Later This Year

The third FOMC meeting of the year ended this afternoon with no surprises. The FOMC statement had no policy changes. The only changes from the last statement were new descriptions of the health of the economy. In March, the Fed said that "economic growth has moderated somewhat." In today’s statement, the Fed said that "economic growth slowed during the winter months, in part reflecting transitory factors." By saying the slowdown was due to "transitory factors", the Fed continues to leave the door open to a rate hike sometime this year. That’s good news for savers. However, the FOMC statement didn’t add any clarity to the timing of the first rate hike remain. It still has the same statement about the decision for the first rate hike:

The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Fed still wants to see improvement in the economy before it’ll raise interest rates. If the second quarter isn’t a big improvement over the first quarter, the chance of a rate hike this year will diminish. The latest GDP report was released this morning, and according to the Wall Street Journal:

Commerce Department reported the U.S. economy grew at a 0.2% annual rate in the first quarter. It was the worst performance in a year, pocked with evidence of a slowing trade sector and anemic business investment. The report also showed annual consumer price inflation slowed in the first quarter.

Just like the last two meetings, no one in the FOMC voted against the policy action. The inflation hawks must be content in the Fed putting rate hikes on the table for future meetings. Before a rate hike, we’ll probably see one or more inflation hawks vote against the majority for not raising rates. That will be something to look for in future meetings.

Future FOMC Meetings

The next two FOMC meetings are scheduled for June 16-17 and July 28-29. The June meeting will include the summary of economic projections and a press conference by Chairwoman Yellen.

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Dave   |     |   Comment #1
Nothing to see here....

What did you expect.....

It will be years before your see 2.00% rate for the saver.

Find the highest rate now and put your money there.

Good luck.
Dave   |     |   Comment #2

2.00% rate by the Feds to the banks, etc.....
Anonymous   |     |   Comment #3
IMHO the timing of the first rate increase is a meaningless formality. The Fed will gradually make minimal increases this year or next. So what?
Anonymous   |     |   Comment #4
If there is a hike in September, which is becoming doubtful based on the meager economic growth, it will be a one-time miniscule 25 basis point rise then they will be done. I wouldn't be surprised if we don't see QE4, by this time next year, if we enter a deflationary period.
Anonymous   |     |   Comment #6
Have to agree.  Oh, sure, we might see something perfunctory, just so they can say they raided rates in an effort to quiet their many critics.  But real, sustained, interest rate increases will happen only with genuine economic recovery . . which does not appear to be in the cards.

I have long believed no real recovery can happen until after January 20, 2017.  But this is not to say a recovery will happen thereafter.  I'll have a much better idea what to do with my money early in November of next year.  
Anonymous   |     |   Comment #7
Sorry.  That's "raised" rates, not "raided" rates.  No edit capability here (sucks) so doing the best I can to put right.  
cumulus   |     |   Comment #5
If you're new to this discussion Bankaholic provides a
decent summary (I'd ignore any prognostications) here.
Anonymous   |     |   Comment #8
The FED will never raise interest rates because the Wall Street boys will not allow it.  Wall Street control of the FED started way back when Alan Greenspan became FED chairman.
Anonymous   |     |   Comment #9
If the fed raises the fed funds rate a quarter or half what will that do for CDs? Nothing! Keep an eye on the 10 year yield, that is what I want to see go up and so far it seems to be moving the way the fed doesn't want it to.
Hoody   |     |   Comment #10
so maybe all the worry I had about doing 7 yr 3.1% CD's at Navy will subside somewhat :)

wonder how those that still have 5%er coming due are feeling now, I said back when that even those taking out those 10yr 5% will end up being caught up in this game.