The Federal Reserve Open Market Committee on Wednesday voted to keep its benchmark interest rate steady at 1.5% to 1.75%.
In its statement, the committee said, “The labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a moderate pace, business fixed investment and exports remain weak.”
The term moderate used to describe consumer spending in this month’s statement was a downgrade from the word “strong” that was used in December.
On inflation, or the lack thereof, the committee said, “On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.”
Mike Fratantoni, senior VP and chief economist for the Mortgage Bankers Assocation, parsed today’s FOMC statement: “The job market remains strong, with the unemployment rate at a 50-year low, and inflation remains near the Federal Reserve’s target. As a result, the market anticipates that the Fed is unlikely to move rates this year, and today’s communication is consistent with this expectation. We continue to expect that the Fed’s next move will be a rate increase at some point in 2021.”
“In recent months, the Fed has been successful in providing sufficient liquidity to the market through Treasury bill purchases, and there was no spike in rates at year’s end – as some had feared. The Fed’s plans with respect to further growth of the balance sheet, and ongoing support for market liquidity, continue to evolve.”
