Wednesday, June 15, 2016

"Economists React to the Fed Decision: ‘Too Many Uncertainties’"

From Real Time Economics:

Fed officials left interest rates unchanged after their two-day meeting
Federal Reserve officials on Wednesday decided to hold the central bank’s benchmark interest rate steady. The decision by the Federal Open Market Committee was no surprise, but a statement accompanying that determination does help shed new light what the Fed is thinking about the economy and the for rates over the coming months. Here are some early reactions to Wednesday’s news.

There are too many uncertainties to justify pulling the trigger at the June meeting. It is concerned about the employment picture even though economic growth has picked some steam. The FOMC wants to make sure that the surprisingly weak payroll number for April is a temporary phenomenon and not a harbinger of a weaker economy to come.” — Sung Won Sohn, California State University Channel Islands

“Fed officials expect/hope to be tightening again this year, but some officials have scaled down their tightening projections. Nor did they say much to downplay the weakening in the payrolls data. In any event, they do not sound like they are in a rush, although they are not sending much of a specific signal one way or other. The focus now turns to [Chairwoman Janet Yellen's] press briefing. She will undoubtedly once again note that ‘monetary policy is not on a preset course.’ ” — Jim O’Sullivan, High Frequency Economics

“Policymakers are now projecting that the economy will run beyond full employment for the next 2 ½ years and the inflation rate will never get above 2%. That’s either a very bearish assessment of the economic state affairs in the U.S. or it’s a forecast that will not hold together over time. Once again the Fed has erased/revised/ignored the guideposts that they have offered over the past several months and years. For now, one should expect monetary policy to remain on the easier side and it is unclear how the FOMC will ever be able to guide the market to expect an official rate hike since they have a pattern of never following through on their words or guideposts.” — Joe Carson, AllianceBernstein

“The Fed has consistently noted that its policy is being driven by data, and with unemployment at 4.7% and core CPI at 2.1%, the lack of a rate hike implies that the Fed has significant underlying concerns. Despite Brexit concerns, global growth concerns, and financial market volatility, there was no mention of any international factors or the global economy in the June FOMC statement. We believe the Fed will not raise rates this year, and that it is likely to cut rates or engage in other monetary stimulus in 2017.” — Jason Schenker, Prestige Economics