Newsroom
April 29, 2015
No change in forward guidance or rates from FOMC
The Federal Open Market Committee acknowledged that first-quarter economic activity was slow due to "transitory factors" but did not announce any changes in the federal funds rate or forward guidance Wednesday at the close of its two-day meeting.
NAFCU Chief Economist and Director of Research Curt Long said "transitory factors" is likely a reference to bad weather, low energy prices and a stronger dollar.
"It would appear that the option to increase rates in June remains on the table, but that scenario seems unlikely given the poor first quarter in which the economy only grew by an estimated 0.2 percent," Long wrote in a NAFCU Macro Data Flash. "The FOMC reaffirmed that it would like to see continued improvements in the labor market and that it wants to be ‘reasonably confident' that inflation will improve before increasing the federal funds rate."
Long says economic conditions are similar to a year ago, when GDP and inflation sank during a frigid first quarter. "If the economy rebounds as it did in 2014, it will still be on pace to hit the committee's year-end forecast, in which 15 of the 17 committee members indicated that it would be appropriate to increase rates sometime this year. However, there are a couple of headwinds today that were not present in 2014 – low oil prices and the surging dollar."
In its March meeting, the committee left the federal funds target rate at a range of 0 to 0.25 percent and indicated that the earliest a rate increase would occur would be June. In January, the committee had said it could remain "patient" with regard to its 2 percent inflation goal.
NAFCU Chief Economist and Director of Research Curt Long said "transitory factors" is likely a reference to bad weather, low energy prices and a stronger dollar.
"It would appear that the option to increase rates in June remains on the table, but that scenario seems unlikely given the poor first quarter in which the economy only grew by an estimated 0.2 percent," Long wrote in a NAFCU Macro Data Flash. "The FOMC reaffirmed that it would like to see continued improvements in the labor market and that it wants to be ‘reasonably confident' that inflation will improve before increasing the federal funds rate."
Long says economic conditions are similar to a year ago, when GDP and inflation sank during a frigid first quarter. "If the economy rebounds as it did in 2014, it will still be on pace to hit the committee's year-end forecast, in which 15 of the 17 committee members indicated that it would be appropriate to increase rates sometime this year. However, there are a couple of headwinds today that were not present in 2014 – low oil prices and the surging dollar."
In its March meeting, the committee left the federal funds target rate at a range of 0 to 0.25 percent and indicated that the earliest a rate increase would occur would be June. In January, the committee had said it could remain "patient" with regard to its 2 percent inflation goal.
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