After raising the federal funds rate at the last FOMC meeting update in March, the Committee announced in its statement that it will maintain the rate this month. Currently, the target rate range is 1.5% to 1.75%. The decision was unanimous among Chairman Jerome Powell and the seven voting FOMC members.
The meeting did shed light on the FOMC’s anticipated path for its upcoming monetary policy plans. Let’s see how the economy has strengthened in the last two months and what experts think that means for future rate hikes this year.
According to the FOMC statement, the country’s overall economy is rising “at a moderate rate.” The labor market is continuing to strengthen with strong job gains over the last few months in addition to a low unemployment rate. Consumer spending is also up year over year. Experts say that the current economic expansion is the second longest on record for the nation.
One of the Fed’s Congressional mandates is price stability, which is why they seek an optimal inflation rate of 2%. Since bringing down interest rates so low in the wake of the 2008 recession, inflation has also stagnated — until recently.
Overall inflation (excluding food and energy) is finally closing in on that target rate. The Committee expressed its expectation that additional adjustments to its monetary policy will continue to strengthen both economic activity and the jobs market.
Interest Rates Outlook
The FOMC statement also discussed future rate hikes for the year.The Committee expects that “economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.”
At the same time the statement also anticipates the fed funds rate to remain historically low “for some time.” As usual, the Committee emphasized that the actual trajectory of rates is dependent upon incoming economic data. This is discussed by the Fed’s Board of Governors and regional Fed bank presidents at each meeting.
When can we expect the next rate hike? If the economy continues to stay on track, some experts predict the next raise to take place at next month’s June meeting. This is largely due to the fact that a press conference is scheduled to follow the meeting, which sometimes signals an announcement from the FOMC that can be further explained by Chairman Powell.
Still, today’s rates remain competitive, particularly after no action at the latest meeting.
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