Let’s face it, the Fed is just plain reluctant to boost interest rates.
The April meeting of Fed officials has come and gone and there were few hints a more aggressive posture is in the offing.
Yes, the labor market continues to improve, the jobless rate resides at 5.0%, and inflation has been showing signs of gradually ticking higher. But that doesn’t seem to be making an impression on Janet Yellen.
I can only speculate but I suspect there are several factors that are in play right now.
- Moderation in Q1 economic activity
- A PCE Price Index that remains below target
- A reluctance to go against the grain of other major central banks
- Fears of creating global instability and/or rocking U.S credit markets
- A resumption of an upward trend in the dollar
- Yellen’s dovish tilt
- Brexit worries – the vote occurs one week after the Fed’s June meeting
- Election year – the Fed would deny it, but it doesn’t operate in a political vacuum.
Investors will continue to parse and dissect the Fed’s statement over the next couple of days. But with no specific language that illustrates a more receptive mood (or significantly better economic data), a June rate hike remains only a distant possibility.
Maybe the Fed is waiting for all the storm clouds to recede. But that will never happen.