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Fed holds rates with no indication of tighter policy on radar
The Federal Open Market Committee (FOMC) Wednesday maintained the federal funds target rate at its current range of 0 to 0.25 percent. Of note, in an optimistic signal, the word "considerable" was removed from the statement when describing pandemic-related risks to the economy.
“The FOMC’s April statement was nearly unchanged from the prior meeting and contained no indication that tighter policy is on the committee’s radar," said NAFCU Chief Economist and Vice President of Research Curt Long in a new Macro Data Flash report. “Despite acknowledged progress both on the vaccine front and in recent economic data, Chairman Powell sounded no nearer to the next rate hike than he was during his last press conference.
“Importantly, the FOMC is still inclined to see any spike in inflation over the coming months as transitory,” added Long.
During his post-meeting press conference, Fed Chairman Jerome Powell emphasized the committee’s triggers for raising rates from their present level, which include:
- inflation has reached 2 percent and stayed at that level for some time;
- longer‑term inflation expectations remain well anchored at 2 percent; and
- the labor market has sufficiently recovered.
“Many observers are anticipating that inflationary pressures will force the Fed to act earlier than it prefers, but the Fed’s messaging has remained consistent,” Long concluded. “NAFCU continues to believe that it will be at least two more years before the Fed’s next rate hike.”
More insights from the meeting can be found in the new Macro Data Flash report. The FOMC is expected to meet next June 15-16.