Federal Open Market Committee: No Change, But June is a Possibility

Economic Pulse
April 27, 2016
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Heidi Learner

Heidi Learner

Chief Economist

In Short:

What changed in the FOMC statement? March’s phrase that “global economic and financial developments continue to pose risks” was deleted; instead, today’s statement merely referenced the fact that the Committee is monitoring “global economic and financial developments.” While this may seem like a negligible change in wording, the fact that the FOMC does not view overseas developments as actively threatening U.S. growth suggests the door for a June rate hike is now open, even as the Committee acknowledged what is likely to be a very weak quarter for growth. (Q1 GDP data will be released tomorrow.) Most other assessments were unchanged. As at the last meeting in March, member Esther George again voted for a rate increase to ½ - ¾ percent; in the March minutes, she had noted that with the economy “apparently near full employment” and some “firming of underlying inflation trends” that “postponing the removal of accommodation could increase financial distortions and risks to the economy and undermine the achievement of the Committee's longer-run objectives.”

On economic activity:

March 16th: “Expanding at a moderate pace despite the global economic and financial developments of recent months. …household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft.”

April 27th: “Growth in economic activity appears to have slowed…growth in household spending has moderated, although households' real income has risen at a solid rate and consumer sentiment remains high. Since the beginning of the year, the housing sector has improved further but business fixed investment and net exports have been soft.”

On global developments:

March 16th: “The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks…the Committee continues to monitor inflation developments closely.”

April 27th: “The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen…the Committee continues to closely monitor inflation indicators and global economic and financial developments.”

On labor markets:

March 16th: “A range of recent indicators, including strong job gains, points to additional strengthening of the labor market.”

April 27th: No change.

On inflation:

March 16th: “Inflation picked up in recent months; however, it continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.”

April 27th: “Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Future action:

March 16th: “In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

April 27th: No change.



Heidi Learner

Heidi Learner

Ms. Learner analyzes the macroeconomic and legislative environment affecting commercial real estate markets on a national and regional basis and develops real-time measures of supply and demand for commercial space.