FOMC monetary policy: Assessing the bias

FOMC yesterday announced decision of its April’s policy meeting to keep interest rates unchanged and keep it in range of 0.25-0.5%.

Let’s look at the monetary policy statement details to assess the bias towards future policy adjustments.

• FOMC recognizes Labour market conditions have improved and household’s real income has risen at solid rate, Consumer sentiment also at high. Housing sector has improved. (Hawkish)
• But it also notes, growth in economic activities has slowed and household spending moderated. Business fixed investment and net exports soft. (Mild Dovish)
• Inflation running below 2% objective due to lower energy prices and lower import prices. Market based inflation expectation low and longer term survey based measure balanced. (Neutral)
• FED expects economic and labour market recovery will continue and to help that policy adjustment will be gradual. FED will continue to monitor inflation pressures, expectations, labour market conditions, global economic and financial developments to decide over next moves. It will also be monitoring expected and actual progress in inflation front. (Neutral)
• FED is and will be continuing to reinvest proceeds under QE unless normalization process is well under. (Neutral)

FOMC policy is posing a more neutral stance, indicating that FED is in no hurry yet to adjust policy. That brings major focus towards inflation and growth. Only an improved figure, may assure hike at next meeting.