The FOMC is holding its target rate range at 0.25 to 0.50 percent. Job gains were described as having diminished; business investments were also described as being negative and soft. However, there were some positives in the statement following the FOMC meeting. Household spending, the heart of the nation’s economy was upgraded from moderate in April to now having strengthened. The FOMC quarterly forecasts were also released showing policy makers still see two rate hikes this year but at a slower path over the next two years. Expectations for GDP growth are still centered near two percent but edged slightly lower to a 1.7 percent midpoint. The decision to keep rates unchanged was unanimous 10-0.
Janet Yellen Speaks
May’s miniscule 38,000 gain in nonfarm payroll along with April’s unimpressive rise of 123,000 are below what is needed to maintain stability in the labor market. Janet Yellen, the Federal Reserve Chairperson, did point out that this is only one month of data and one month of data is just that, hinting that upward revisions to payrolls are a possibility. She cited other indications including jobless claims and job openings as all positives. Yellen did suggest that the possibility that strength in the yet to be released June employment report could lead to a rate hike at the next FOMC meeting in July. Yellen stressed that there is no timetable for the Fed to raise rates, and that that decision will be data dependent. She stated inflation has been running low, but like the rest of the FOMC, sees it rising toward the 2 percent goal overtime. Yellen pointed to low productivity growth as a key factor for the decision of the FOMC to lower GDP expectations as well as downgrade their expected path of future rate hikes. She repeated again that the Fed’s decisions will be entirely data dependent and not dependent on politics when touching upon the election and the possibility that rate hikes may be affected as November approaches. A rate hike at the July meeting will be entirely based off of the June employment report, where enormous strength could keep chances of a hike alive.