FOMC: A virtual non-event - ING

The Federal Reserve, just announced, as expected, that it kept interest rates unchanged. According to Rob Carnell, Chief International Economist at ING the FOMC statement contained barely any substantive change. He notes little reference to the recent rise in inflation numbers. 

Key Quotes: 

“The latest FOMC statement was a virtual non-event, and contained barely a hint that rates would rise again soon. If the Fed does intend to raise rates three times this year as their December dot diagram suggested, then they are making it difficult for themselves by not opening the door to a March hike.”

“The only substantive change to the FOMC statement text was “Measures of consumer and business sentiment have improved of late. Inflation increased in recent quarters but is still below the Committee's 2 percent longer-run objective”.

“There is little reference to the fact that inflation is now knocking at the door of their longer run objective, or that wages growth now appears to have taken off.”

“With further strength in the labour market and inflation likely to be evident before the March meeting, and the likelihood that the Fed’s longer run inflation objectives will not only be met but possibly surpassed by then, we feel that the Fed has missed a trick today in not nudging markets in the direction of a March hike. And if they do not move then, it will appear to some market participants that the Fed is falling behind the curve.” 

Fed leaves rates unchanged as expected at its 1st meeting of 2017