WASHINGTON (3/19/15)--The first round of rate hikes won't arrive in April, the Federal Open Market Committee (FOMC) said in its policy statement Wednesday, but it may still soon be on its way.
By stripping the word "patient" from its policy statement, the FOMC could be foreshadowing that a rate hike is just around the corner. The committee was clear that the first hike won't come at its next meeting.
"The FOMC's statement today, that an April increase in the federal funds rate from the current 0% to 0.25% range remains unlikely, confirms the Fed's commitment to ensuring that monetary policy continues to support an economy that is moving toward full employment and price stability," said Perc Pineda, CUNA senior economist.
Any hesitation by the Federal Reserve's monetary policymaking body to edge rates higher likely stems from worries over lagging inflation.
In fact, some analysts have interpreted Wednesday's statement to read that because of inflation, even when the FOMC chooses to raise interest rates, it will do so at a slower pace.
"It is expected that a hike in the range of the federal funds rate will, firstly, continue to be data dependent," Pineda said. "Secondly, it will be gradual, and thirdly, at a carefully measured pace."
The FOMC also said that economic growth has moderated somewhat over the past several weeks, despite continued improvements in the labor market.
But Pineda said that some weakness isn't a surprise for this time of year.
"We cannot expect the Fed to have a myopic view of the economy based on standard volatility and other short-run factors--something that credit unions should keep in mind," Pineda said. "For example, while, on a monthly basis, retail sales, new residential construction and industrial production data were lower in February than January, it does not foretell a slowing U.S. economy anytime soon."