Economy Watch: No Surprises From the Fed

As expected, the Federal Open Market Committee decided to keep interest rates as is, citing several economic factors that influenced its decision.
Janet Yellen, Chair of the Board of Governors of the Federal Reserve System
Janet Yellen, Chair of the Board of Governors of the Federal Reserve System

The Federal Open Market Committee‘s June meeting came and went as expected, ending on Wednesday without a change in the federal funds rate that would ripple out into the wider economy by making money a little more expensive. The central bank pointed to a mixed bag of economic metrics as its reason for holding off in June (and by implication, maybe in July and then September.)

“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the Fed noted, while leaving itself room to do what it wants later. “However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

The central bank also said, “although the unemployment rate has declined, job gains have diminished. Growth in household spending has strengthened. Since the beginning of the year, the housing sector has continued to improve and the drag from net exports appears to have lessened, but business fixed investment has been soft.” It was a list of variable indicators of economic health.

Unusually, there were no votes against maintaining the status quo on interest rates: all of the members of FOMC voted for it. Another thing possibly on their minds, though not mentioned in the statement, was the looming vote in the U.K. on separation from the EU. That conceivably might slow economic activity worldwide in unpredictable ways, including in this country.