Clarksville, TN – In its monetary policy statement, the Federal Open Market Committee recognized that “economic activity has been expanding moderately after having changed little during the first quarter.” Labor market slack has “diminished somewhat.” Growth in consumer spending has been “moderate,” while the housing sector “has shown some improvement.”
In the revised Summary of Economic Projections, Fed officials lowered their forecasts of 2015 GDP growth, but raised slightly their expectations for growth in 2016 and 2017.Fed Chair Janet Yellen repeated that policymakers believe “the first increase in the federal funds rate will be appropriate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term.”
However, she emphasized that “the initial increase should not be overstated: The stance of monetary policy will likely remain highly accommodative for quite some time after the initial increase in the federal funds rate,” adding that “although policy will be data dependent, economic conditions are currently anticipated to evolve in a manner that will warrant only gradual increases in the target federal funds rate.”
Economic data were mixed, consistent with a moderate pickup in growth in 2Q15. While there were no major surprises in the policy statement and Yellen covered no new ground in her post-FOMC press conference, financial market participants seemed relieved once that was out of the way.
However, Greece remained on ongoing concern, as debt negotiations with the IMF broke down and a run on the banks began.
Next week, the economic data have some potential to surprise (monthly changes in durable goods orders and new home sales are notoriously erratic). However, these figures aren’t going to alter the bigger picture. The third estimate (second revision) of first quarter GDP growth (a -0.7% annual rate in the second estimate) is expected to be revised to show a smaller decline (or perhaps a slight increase).
May personal income and spending figures should help fill in the consumer picture for 2Q15. This is currently being billed as the final make-or-break point in Greece’s crisis, but every other time has ended with the can being kicked further down the road. We’ll see.
Consumer Money Rates
Treasury Yield Curve – 06/19/2015
As of close of business 6/18/2015
S&P Sector Performance (YTD) – 06/19/2015
As of close of business 6/18/2015
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The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business June 18th, 2015.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
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