Courtesy of Mish.
Nothing much changed as a result of today's FOMC meeting. If you are having trouble falling to sleep, I have the cure. Read today's FOMC Statement as it's sure to do the trick.
The Financial Times reports Fed Sets Course for 2015 Rate Rise.
The Federal Reserve set course for an increase in short-term interest rates as soon as September, as it expressed cautious optimism about the US economy following a sharp slowdown that struck in the first quarter.
However interest-rate projections from the Federal Open Market Committee signalled that the pace of tightening will be gradual, as officials seek to quell fears of a spike in borrowing costs.
A chart of interest-rate predictions from Fed officials pointed to two increases later this year, but the committee appeared to be heavily divided over whether that many rises would be merited, with an increased number of policy makers advocating only one move.
The Fed is treading a precarious line as it attempts to signal a rate rise while damping the risk of a market tantrum that could derail global growth. Top officials have repeatedly insisted policy will only be tightened modestly, and today’s forecasts from officials put the longer-run rate at just 3.75 per cent.
Stanley Fischer, Fed vice-chairman, said this month that “lift-off” was the wrong word for rate rises when they came, insisting that the central bank would instead be “crawling” as it pursued incremental increases.
Even so, some analysts argue that any move this year would be premature and choke off the recovery. Among them is the International Monetary Fund, which recently made a prominent call for the Fed to wait until 2016. Some officials within the Federal Open Market Committee have also been voicing caution.
Lael Brainard, a Fed governor, this month said the recent economic weakness may not be transitory and that more optimistic growth predictions were underestimating the negative investment implications from the oil price drop and the hit to growth from the higher dollar.
Gradual Pace
The Wall Street Journal reports Fed Signals Rate Hikes at a Gradual Pace
The Federal Reserve signaled it was moving toward interest-rate increases later this year now that signs of a slowdown in economic activity are waning, but the path of rate increases could be less steep than officials anticipated.
The last time the Fed made such projections, its consensus appeared to be building around two rate increases this year. Fed officials also nudged down their rate projections for 2016 and 2017 by a quarter percentage point. The shifts suggested officials have become less certain about the longer-run vigor of the U.S. economy and its capacity to withstand much higher rates. Expansion of output is on track again in 2015 to undershoot the Fed’s expectations.
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