The two-day regular FOMC meeting ended on May 1 without any surprises.  Even though the FOMC held the rates steady, Chair Powell’s press conference did not signal a rate cut any time soon. The stock market reacted negatively in response.  This is a case of Good News (economically) resulting in a Bad Outcome (stock market).

This is just a small example of the significant challenge the FOMC has in shaping or controlling the expectation to Forward Guidance in the FOMC’s normalization effort.

The Fed’s overarching goal for deploying monetary policy tools is to sustain the economic expansion with a strong job market and stable prices.

This year, economic growth and job creation have both been a bit stronger than anticipated while inflation has been somewhat weaker. The solid underlying fundamentals are supporting the economy, including accommodative financial conditions, high employment and job growth, raising wages, and strong consumer and business sentiment.

Overall, the economy continues on a healthy path, and the FOMC believes that the current stance of policy is appropriate.

The Committee is strongly committed to its symmetric 2 percent inflation objective.  The overall inflation fell at the start of this year as earlier oil price declines worked through the system. Core inflation unexpectedly fell as well.  There may be some transitory factors at work. Global growth risks have moderated somewhat, and global financial conditions have eased.

The FOMC views these developments as consistent with continued patience in assessing further adjustments in monetary policy.  There is no strong case to move rates in either direction, and there is no sign of the economy overheating.

In sum, and as expected, the Fed has the luxury of waiting since inflation has turned lower, and although the first quarter GDP has surprised on the upside, it appears that the FOMC does not expect economic activities to maintain this above trend rate.

Bottom line: no change in policy, remain patient and ready to take action if incoming data warrants.

Here is our language comparison to the March 2019 press release.