The US central bank has failed to provide a more concrete clue as to when it would announce its first rate hike in nine years. The Fed said it all hinged on the development of crucial job and inflation indicators.
A statement coming from the Fed’s Open Markets Committee (FOMC) around Janet Yellen on Wednesday suggested the US central bank was still on track to raise rates once or twice over its four remaining policy-setting meetings in 2015. But no specific hint was given as to when the Fed would start tightening its monetary policy.
The statement said the US economy was growing moderately after a winter lull. After contracting in the first quarter, GDP was now on track to expand by between 1.8 percent and 2.0 percent, it added.
The Fed also pointed to continued improvements on the labor market, with a huge 280,000 jobs created in May.
Employment matters most
“The FOMC is focused on three things – jobs, jobs and jobs,” FTN Financial analyst Chris Low commented.
Fed cautious over rates hikes (April)
But Fed policymakers wanted to wait for a bit more data to confirm their view that the weaknesses behind the first-quarter dip were indeed transitory.
They maintained the current near-zero rate for now and suggested a hike would only be appropriate after further improvement in the labor market and greater confidence that inflation would rise later in the year.
Wednesday’s Fed meeting was the first since the peak of the financial crisis in which the outcome was not constrained by forward guidance, the central bank’s open-ended commitment to keep rates low in order to counter the worst downturn since the Great Depression.