June liftoff appears unlikely for Fed rate hike

April 29, 2015
WASHINGTON (4/30/15)--Nothing the Federal Open Market Committee (FOMC) wrote in the policy statement it released at the conclusion of its two-day meeting Wednesday gave an indication it has plans to raise interest rates in June.

Job growth moderated and inflation has stagnated, the FOMC said, though the committee believes inflation will gradually rise towards its 2% target range "as the labor market improves further and the transitory effects of declines in energy and import prices dissipate."

"There is no compelling economic data that would cause the Federal Reserve to raise rates from the current 0% to 0.25% target range soon," said Perc Pineda, CUNA senior economist. "Economic growth has slowed in the first quarter, confirmed by the 0.2% increase in GDP, which is well below most economists' forecast." (See related story: GDP disappoints with 0.2% 1Q performance.)

Pineda said that while there are a number of explanations for the slower economic growth, the recent GDP report indicates slack in capacity utilization, which affects unemployment and price growth.

"The economy is still waiting for the rate of unemployment and inflation that's appropriate for the Federal Reserve to raise rates," Pineda added. "Nevertheless, a near-zero rate is not going to be around indefinitely."

The FOMC reiterated Wednesday that even after employment and inflation are near mandate-consistent levels, economic conditions may for some time warrant keeping interest rates below their typical levels.