WASHINGTON (1/26/16)--Blizzard conditions in the nation’s capital will not postpone this week’s Federal Open Market Committee meeting, the Federal Reserve announced Monday. Nor will they cool the majority of the committee’s sentiment on the health of the economy.
Confidence in underlying economic fundamentals, such as a strengthening labor market and an upturn in spending, could leave the door open for a second rate hike in the coming months, analysts have predicted (MarketWatch Jan. 25).
“If you look at the financial market forecast (CME Group), the probability today that the Fed will raise rates in March is about 30%,” Perc Pineda, CUNA senior economist, told News Now. “Our sense is that the stock market turmoil in the first three weeks is transitory--and that the underlying fundamentals of the U.S. economy are sound and in fact not worse than in previous periods. However, there could be data surprises between now and March, which is key considering that the Fed continues to underscore that its actions are data driven.”
Volatility in the stock market in the days following the first rate hike has raised the question among economists about whether the Fed may rein in its hawkish monetary policy stance, but others have said it’s too soon to tell.
“They are not going to make a fundamental reassessment of economic prospects of the United States based on 14 trading days,” Chris Probyn, chief economist at State Street Global Advisors, told MarketWatch.
Ellen Zentner, chief economist for Morgan Stanley, said: “It is too early to admit defeat.”
The Fed will release its policy statement at the conclusion of its two-day meeting Wednesday. Fed officials unable to travel to Washington, D.C., for the meeting will participate via videoconference.