FOMC Leaves Rates Unchanged

Gary Pzegeo, CFA
May 02, 2018

As expected, there was no change in policy from the Federal Reserve today. Language in the Fed’s last two post-meeting press releases were very similar regarding its description of the economy and the components of growth.
 

As expected, there was no change in policy from the Federal Reserve today. Language in the Fed’s last two post-meeting press releases were very similar regarding its description of the economy and the components of growth. There was an acknowledgement of the recent uptick in inflation and the Fed slightly altered its description of the inflation target. 

Following is a summary of the FOMC’s statement.

Growth

  • The labor market continued to strengthen.
  • Household spending moderated from strong fourth-quarter readings.
  • Business fixed investment has been growing strongly.

Inflation

  • Headline and core inflation have moved close to 2%.
  • The statement included the word “symmetric” to describe the Fed’s 2% inflation target.

Policy

  • In a unanimous vote, the target range for federal funds was maintained at 1.50% - 1.75%.

Markets placed a low probability on any action at today’s meeting, but post-meeting market reactions indicate that this is a marginally more dovish outcome than expected. Many are interpreting the emphasis on a symmetric 2% inflation goal as reducing the likelihood of the Fed becoming more aggressive in response to recent gains in inflation.

Gary Pzegeo joined CIBC Atlantic Trust Private Wealth Management in 2007 as head of fixed income, focusing on portfolio management, trading, policy formulation and client service.