FOMC Statement: June Is on the Table

As was expected, the Federal Reserve’s (Fed) policymaking arm, the Federal Open Market Committee (FOMC), decided to keep rates unchanged at the conclusion of their two-day meeting. With no press conference from Fed Chair Janet Yellen and no new set of economic forecasts or “dot plots” from FOMC members, this meeting was all about the statement.

The key to the statement was the removal of the line, “However, global economic and financial developments continue to pose risks,” which was added to the statement released at the conclusion of the March meeting. (A side by side of today’s statement versus the statement released on March 16, 2016, is here.)

Relative to the March statement, the Fed modestly upgraded its assessment of the labor market and slightly downgraded its account of economic activity (incomes are up and housing is okay; but consumer spending, business capital spending, and net exports are weak). The statement slightly downgraded its inflation assessment, dropping the line from the March 2016 statement that noted that inflation had “picked up in recent months,” and instead said, “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.” There were no changes to its assessment of inflation expectations versus the March 2016 statement.

But perhaps, what is most noteworthy is what stayed the same. The statement continued to say that future rate hikes are data dependent and that the Fed is not ready to let its balance sheet shrink anytime soon.

The next key event for Fed watchers is a May 1, 2016 speech by Bill Dudley, President of the New York Fed and at the “center of gravity” at the Fed, along with Fed Chair Yellen and Fed Vice Chair Stanley Fischer. The minutes of this meeting—which will presumably explain why the Fed dropped its concern about global developments—will be released on May 18. The next FOMC meeting (June 14–15)  will include a press conference from Yellen and a new set of economic forecasts and “dot plots” from FOMC members.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. The eleven-person FOMC is composed of the seven-member board of governors, and the five Federal

Reserve Bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other regional Federal Reserve Banks rotate their service in one-year terms.

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