Not Much to Discern from Latest FOMC Policy Statement

February 1, 2017

The FOMC document¬†released today reads almost identically to the previous December statement when the federal funds target range was lifted 25 basis points to 0.50-0.75%. The range was not increased further today, and the decision, like December’s verdict, was unanimous by a 10-0 vote despite at changeover in the voting-privileged district presidents. At the December meeting, this group included Bullard, George, Mester, and Rosengren. The 2017 voting district presidents are Evans, Harker, Kaplan, and Kashkari.

In the opening paragraph in which economic conditions are laid out, the language is almost identical in the two statement. The biggest modification is the inserted statement that reads, “measures of consumer and business sentiment have improved of late.” Another tweak involves the jobless rate, which in December was said to have declined and now “stayed near its recent low.” The ensuing paragraphs in today’s statement are the same as before.

In the absence of a press conference or new forecasts from the FOMC to lend clarification to the statement, there’s not much for markets to do with this event, which is good given the frenetic pace of developments that the new Trump administration has been offering on a literal daily basis. The last thing the Fed needs to do is become a bigger story in this delicate point in America’s political and social history.

Market reaction as of 14:25 EST (19:25 GMT) was very muted as one would expect. The 10-year Treasury yield was down a basis point. The dollar had lost merely 0.1% against the euro and 0.2% to the yen, and gold was 0.1% firmer. U.S. stock market indices were flat to marginally firmer. All in all, the FOMC managed to make its first of eight scheduled policy meetings this year a non-event, which is no doubt the outcome officials sought.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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