PrefBlog

The FOMC release kept policy hikes on hold:

Information received since the Federal Open Market Committee met in March indicates that labor market conditions have improved further even as 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. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. 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.
…
Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.
…
Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

This has been interpreted as dovish:

Treasuries trimmed losses from earlier in April after the central bank’s policy-setting Federal Open Market Committee finished a meeting this week by opting against raising interest rates. The statement suggested officials are still looking for the signs of growth, inflation and global stability to justify a move.

“We read the April FOMC statement as slightly dovish,” according to a report Morgan Stanley issued Thursday by analysts including Matthew Hornbach, the head of global interest-rate strategy in New York. “We see it increasingly unlikely that the Fed will be able to deliver a rate hike at the June FOMC meeting.”

… and the US economy is no great shakes:

The U.S. economy expanded in the first quarter at the slowest pace in two years as American consumers reined in spending and companies tightened their belts in response to weak global financial conditions and a plunge in oil prices.

Gross domestic product rose at a 0.5 percent annualized rate after a 1.4 percent fourth-quarter advance, Commerce Department data showed Thursday. The increase was less than the 0.7 percent median projection in a Bloomberg survey and marked the third straight disappointing start to a year.

Shaky global markets and oil’s tumble resulted in the biggest business-investment slump in almost seven years, and household purchases climbed the least since early 2015, the data showed. While Federal Reserve officials on Wednesday acknowledged the softness, they also indicated strong hiring and income gains have the potential to reignite consumer spending and propel economic growth.

This entry was posted on Thursday, April 28th, 2016 at 11:00 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.