The standout event this week will of course be the release of the FOMC minutes from the April meeting on Wednesdayevening, despite the fact that markets remain absolutely convinced that June is not a “live” meeting. An impressive retail sales report on Friday did nothing to convince investors otherwise and in fact, the implied probability of a rate hike based on Fed Funds futures fell from 8% to 4%.
The end of April ushers in a more fraught period after the firm early quarter investment inflows and quarterly corporate earnings report responses. It is no secret that 70% of all corporate earnings reports beat estimates each quarter regardless of economic conditions. That is due to downbeat original estimates, where earnings reports are then predictably a bit better than expected. The Q1 2016 reports have been very typical in that regard.
No Fed fireworks came from the monetary policy decision today, instead, today’s FOMC meeting shaped the conversation around the timing of the next rate hike in the coming months. As of writing in the midst of Yellen’s presser, it’s been the monetary policy doves who are flying high, rather than the hawks.
Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.