Fed reaffirms highly accommodative stance

Bullet Points I thought Important

·        growth in economic activity has picked up recently
·        slowed sharply during the winter in part because of adverse weather conditions
·        Household spending appears to be rising more quickly.
·        The Federal Opern Market Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions.
·        To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate.
·        The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Comment: The Fed has indicated that the accommodative policy is appropriate for today and that it may, for consideration of ‘economic conditions’ be appropriate even after ‘near mandate-consistent levels’ of employment and inflation are reached.  It is important to recognize that economic conditions are expected to dominate the decision on lift-off and pace of accommodation removal and not pre-ordained policy prescription.
The recognition of stronger household spending and pick-up in economic growth are not surprising.  

There are no real surprises here.

About the Author

Martin McGuire, managing director at TJM Institutional Services

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