Fed Note:
The July FOMC meeting came and went with no action. This was of no surprise to investment markets, which didn’t expect anything. Since there were no updated projections and no planned press conference, it implied the meeting was not going to be an ‘important’ one requiring additional clarification and Q&A with the press.
The Fed’s statement acknowledged a strengthening of conditions in the labor markets and moderate economic expansion, including a frequent comment on stronger household spending but continued softness in business capex. Importantly, the FOMC noted that near-term risks to the economic outlook have diminished, although global conditions continue to be under review. Overall, the message was a bit more optimistic than some recent statements. As has occurred in a few prior meetings over the past year, there was one dissenter (KC President George again), who wanted a quarter-point rate increase.
As of late, in the aftermath of Brexit, political uncertainty and lack of significant upside results in economic data like manufacturing and business spending, the calls for rate hikes have largely fallen silent. Based on the Fed’s own estimates, and a variety of economic departments, the chances of some kind of rate hike towards the latter half of this year lie around 50%. While September remains a possibility, December has looked to be at least equally likely, and, on the more extreme end, a well-known prominent firm or two have made predictions of no action until next year or even 2018.
A look at the dashboard of current conditions:
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