Thursday, February 2, 2017

Reading the Fed Announcement

At its first meeting of 2017 yesterday, the Federal Reserve left its benchmark rate unchanged in a range of 0.50  percent to 0.75 percent, as expected. But it also gave no indication when the next rate hike might come, meaning we could have rates this low for a while yet.

The Fed noted the improvement in both business and consumer sentiment since its December meeting, when it did raise rates. But household spending growth has been moderate, and business fixed investment remains soft.

Last December's dot plot forecast suggested that the Fed was considering raising rates three times in 2017. It would have made sense for the Fed to hike in March if that was still the expectation, but yesterday's announcement makes that less likely to happen.

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