The following information was provided by Alan Blinder, Vice Chairman and Co-Founder of Promontory Interfinancial Network, and Professor of Economics and Public Affairs at Princeton University. It can also be found here.
The Federal Open Market Committee met on May 2-3. To no one’s surprise, they announced no changes in policy, nor even—it appears—to the outlook for future policy. Why should they?
True, there were some “blips” in recent data—actually large ones. First-quarter GDP growth came in at a measly 0.7%, annualized, and core inflation dipped negative for a month in March. The Fed’s statement acknowledged both developments, but evinced no concern with either. For GDP, they said, “The Committee views the slowing in growth during the first quarter as likely to be transitory.” The negative inflation figure was simply mentioned, with no commentary whatsoever.
So the “about 2%” forecast remains intact: about 2% real growth, and about 2% inflation. Private sector forecasters are pretty close to the Fed on this. And most of them expect another 25 basis point rate hike at the June meeting. Seems a good bet.
If there was any suspense at all going into the May meeting, it was about whether the FOMC have anything to say about plans for shrinking its balance sheet. It didn’t—which was, again, as expected. Some information might come in June, but seems more likely in September or even December. Fed watchers, it seems, can continue to relax.
Staff contact: Mark Few, email@example.com, 512-275-2224