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.