FOMC Statement and Press Conference

March 16, 2016

A 9-1 vote left the federal funds target range at 0.25-0.50%, with K.C. Fed President Esther George dissenting in favor of a 25-basis point tightening.  The FOMC released a statement and new forecasts that

  • Identified a moderate continuing recovery with progress both toward absorbing labor market slack and raising inflation closer to the central bank’s target of 2.0%.
  • Revised 2016 growth down 0.2 percentage points to 2.2%; exports and investment have been softer.  2006 personal consumption expenditure inflation down 0.4 ppts to 1.2%.
  • Noted a similar economic baseline outlook to that in December but also global developments since the initial federal funds hike that pose potential downside risks.
  • Reduced the likeliest path of the federal funds rate by about 40 basis points this year and next.
  • Reestimated the neutral federal funds rate in the longer run.
  • Reiterated that all FOMC meetings are live ones in that policy can be changed and that no decisions to be implemented later are decided as yet.  A rate hike at the April meeting six weeks from now wasn’t ruled out in answer to a question that emerged in the press conference.
  • There was no collective FOMC judgement on whether forecast risks are balanced or skewed a bit to the downside.

As the Fed’s thinking unfolded today from 18:00 onward, the dollar declined.  So did the 10-year Treasury yield. Commodity prices and share prices moved higher.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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