Federal Reserve policy makers said the economy weakened, partly for
reasons that will fade, after a sharp slowdown reinforced expectations
officials will keep interest rates near zero at their next meeting in
June or longer.
“Economic growth slowed during the winter months, in part reflecting transitory factors,” the Federal Open Market Committee said in a statement Wednesday in Washington. “The pace of job gains moderated,” it said, and “underutilization of labor resources was little changed.”
Fed officials have said they expect to raise rates this year for the first time since 2006 as the economy nears full employment, and that their decision will be guided by the latest data. A report earlier Wednesday showed growth almost ground to a halt in the first quarter, held back by severe winter weather and slumping business spending and exports.
“Although growth in output and unemployment slowed during the first quarter, the committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace,” the Fed said.
Stocks and U.S. Treasuries pared earlier losses after the announcement. The Standard & Poor’s 500 index was down 0.5 percent at 2,104.62 as of 2:10 p.m. in New York after earlier falling as much as 0.8 percent. Ten-year Treasury notes yielded 2.04 percent, up 4 basis points from Tuesday.
The Fed repeated it will raise rates when it sees further labor-market improvement and is “reasonably confident” inflation will move back to its 2 percent goal over time. The decision was unanimous.
“Inflation is anticipated to remain near its recent low level in the near term, but the committee expects inflation to rise gradually toward 2 percent over the medium term,” the FOMC said.
A run of disappointing economic data has cast doubt on how quickly the Fed can meet its goals for full employment and stable prices.
The economy grew at a 0.2 percent annual rate last quarter after advancing 2.2 percent in the prior three months, Commerce Department data showed. Economists surveyed by Bloomberg forecast a 1 percent gain.
“The economy has dug a deeper hole and will take longer for growth to bounce back above trend,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. “A June meeting is on the table, but it’s a long shot now.”
Employers added 126,000 workers to payrolls in March, the weakest month since December 2013. Reports on manufacturing and retail sales have also trailed behind economists’ expectations.
Even before the release of the first quarter GDP report, economists had pushed back their forecasts for liftoff.
In a Bloomberg survey conducted last week, 73 percent of respondents predicted the central bank will wait until September. In a March poll, a majority predicted the first rate increase in June or July.
more info; http://www.federalreserve.gov/newsevents/press/monetary/20150429a.htm
“Economic growth slowed during the winter months, in part reflecting transitory factors,” the Federal Open Market Committee said in a statement Wednesday in Washington. “The pace of job gains moderated,” it said, and “underutilization of labor resources was little changed.”
Fed officials have said they expect to raise rates this year for the first time since 2006 as the economy nears full employment, and that their decision will be guided by the latest data. A report earlier Wednesday showed growth almost ground to a halt in the first quarter, held back by severe winter weather and slumping business spending and exports.
“Although growth in output and unemployment slowed during the first quarter, the committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace,” the Fed said.
Stocks and U.S. Treasuries pared earlier losses after the announcement. The Standard & Poor’s 500 index was down 0.5 percent at 2,104.62 as of 2:10 p.m. in New York after earlier falling as much as 0.8 percent. Ten-year Treasury notes yielded 2.04 percent, up 4 basis points from Tuesday.
The Fed repeated it will raise rates when it sees further labor-market improvement and is “reasonably confident” inflation will move back to its 2 percent goal over time. The decision was unanimous.
“Inflation is anticipated to remain near its recent low level in the near term, but the committee expects inflation to rise gradually toward 2 percent over the medium term,” the FOMC said.
Benchmark Rate
Officials held the benchmark overnight fed funds rate in a zero to 0.25 percent range, where it has been since December 2008. They had said last month that they would be unlikely to raise rates at their April meeting.A run of disappointing economic data has cast doubt on how quickly the Fed can meet its goals for full employment and stable prices.
The economy grew at a 0.2 percent annual rate last quarter after advancing 2.2 percent in the prior three months, Commerce Department data showed. Economists surveyed by Bloomberg forecast a 1 percent gain.
Lasting Impact
While the impact of unusually harsh winter weather is likely to fade, other drags, including a drop in capital spending and exports, may last longer.“The economy has dug a deeper hole and will take longer for growth to bounce back above trend,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. “A June meeting is on the table, but it’s a long shot now.”
Employers added 126,000 workers to payrolls in March, the weakest month since December 2013. Reports on manufacturing and retail sales have also trailed behind economists’ expectations.
Even before the release of the first quarter GDP report, economists had pushed back their forecasts for liftoff.
In a Bloomberg survey conducted last week, 73 percent of respondents predicted the central bank will wait until September. In a March poll, a majority predicted the first rate increase in June or July.
more info; http://www.federalreserve.gov/newsevents/press/monetary/20150429a.htm
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