FOMC Leaves Rates Unchanged

Gary Pzegeo, CFA
August 01, 2018

The Federal Reserve left the target range for short-term rates at 1.75% to 2.00%. Futures contracts for short term interest rates implied a low probability of any action by the Fed at today’s meeting.

The Federal Reserve left the target range for short-term rates at 1.75% to 2.00%.  Futures contracts for short term interest rates implied a low probability of any action by the Fed at today’s meeting.     

Following is a summary of the FOMC’s statement.

Growth

  • The Fed described the economy as “strong”, which was not surprising given second quarter GDP growth of 4.1%. 
  • Both household and business spending have been growing “strongly”.

Inflation

  • Core inflation remains near the Committee’s symmetric 2% objective.
  • Market and survey-based indicators of inflation expectations were little changed.

Policy

  • The Fed reiterated that further gradual rate increases will be consistent with the current environment. 
  • The FOMC was unanimous in approving today’s decision.

Markets have interpreted “gradual” to mean a rate hike at every other meeting and currently place the odds of an increase at the next meeting (September 26th ) at over 90%.  Reactions from equity and bond markets were hardly noticeable following the release.  

Gary Pzegeo joined the firm in 2007 as head of fixed income, focusing on portfolio management, trading, policy formulation and client service.