Prior Consensus Actual
Federal Funds Rate - Target Level 0.75 to 1.00 % 0.875 % 0.75 to 1.00 %
Consumer spending may have slowed in the first quarter, concedes the FOMC in its May statement, but the fundamentals that underpin the consumer remain solid and point to only "transitory" weakness and a bounce back for the second quarter. As universally expected, policy makers held their federal funds target range unchanged at 0.75 to 1.00 percent.
Other unexpected news since the last meeting was March's rare decline in core PCE prices (less food & gas). The statement does cite the decline, as well as other signs that inflation is soft, but still sees prices moving higher and stabilizing near their 2 percent target.
And there are upbeat notes in the report including for the job market where growth remains solid. And business investment, which jumped sharply in last week's first-quarter GDP report, gets an upgrade from "improved" to "firmed".
Otherwise, this report is virtually unchanged. There is no heightening of attention on global developments, no change in reinvestment policy and no mention of unwinding the Fed's $4.5 trillion balance sheet. The vote was 10 to 0 as the majority moved to Minneapolis' Kashkari who voted against the hike at the March meeting.
Focus now turns to Friday's employment report where expected strength would point to a second-quarter rebound and help confirm expectations for a rate hike at the FOMC's next meeting in June, one of what are expected to be perhaps two or three for the balance of the year.
Source: Bloomberg
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