Newsroom

May 20, 2015

FOMC: 1Q weakness was 'transitory'

Minutes from the Federal Open Market Committee's April meeting showed that committee members regarded first-quarter economic weakness as being partially due to "transitory factors" and do not expect the weakness to continue.

The minutes show that committee members expect the slow first quarter to be followed by economic expansion at a "moderate" pace, with improving labor market conditions. The committee members expect inflation, which remains below their 2 percent goal, will rise gradually.

Members also said that any plan to increase the federal funds rate should be determined on a meeting-by-meeting basis, depending on how economic trends continue.

After the committee's meeting on April 28-29, NAFCU Chief Economist and Director of Research Curt Long wrote, "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 also said 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."

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.