On April-29-2015, the Federal Open Market Committee (FOMC) allowed its Fed Funds rate – target level to remain unchanged at 0.00% to 0.25%. The announcement came as no surprise and here are some key highlights from the meeting.
- Slower economic growth compared to March’s meeting has the Fed conceding economic weakness and gives it not much choice to delay its rate hike without removing the potential for an increase in June, thus giving a hawkish undertone to the meeting.
- Its assessment of economic fundamentals has weakened, e.g. moderate labor conditions, declining household spending, softening business investment, weaker exports, a slow housing market, and below target inflation.
- On a more positive note, it still sees the economy in expansion mode with balanced risks between labor and the economy; and inflation moving towards its 2% target as energy prices rise and stabilize.
- Consumer sentiment remains high which could translate into higher household spending down the road.
- At the end of the day, the Fed remains data dependent and 2nd quarter data should allow it to compare 1st quarter results and flexibility to defer if necessary.