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April 28-29, '15 FOMC Meeting

The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.


In a Nutshell: "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."

Rate Decision: Fed funds rate maintained at a range between 0% and 0.25%

What it Means: The Fed members came, chewed the fat and left with very little heavy lifting having been done. Not surprisingly, the view of economic conditions was downgraded. But we need to remember that this is a summary of the data that was released between the previous meeting and the latest one. Given we already knew the numbers were not particularly good, the more downbeat tenor of the comments should not be taken as anything more than reflecting the downbeat tenor of the data. The key to me was the comment that "economic growth slowed during the winter months, in part reflecting transitory factors." The members are willing to accept the possibility that the economy could turn around sharply, similar to the pattern we saw last year when the first quarter growth rate of -2.1% was followed by a 4.6% increase.

But the real change in the statement was the expected dropping of any calendar reference to a rate hike and a switch to strictly data-watching. That means the Committee feels free to raise rates at any meeting, even the upcoming one. The big issue facing the members is whether they will make the first move at a meeting where a press conference has not been already scheduled.

It is assumed that the Fed Chair would prefer to comment publicly about the first rate hike in nearly a decade. Many believe that if the data don't support an increase at the June meeting, when a press conference is scheduled, the FOMC will not move in July either because there is none scheduled. But I am not so certain. First, Chair Yellen noted at her last press conference that she could have a conference call, as was done under former Chair Bernanke. Second, there will be two more employment reports between the July meeting and the September one. If the economy has clearly rebounded to the point where a rate hike would be supported in July, why would the Fed risk allowing things to get away from it just because a press conference hasn't been scheduled? So don't rule out a July increase just yet.

(The next FOMC meeting is June 16-17, 2015.)


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