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Clarksville, TN – As expected, the Federal Open Market Committee left short-term interest rates unchanged. In its policy statement, the FOMC noted that “labor market conditions have improved further even as growth in economic activity appears to have slowed.”
The key phrase from the mid-March statement, “global economic and financial developments continue to pose risks,” was removed, although officials promised to closely monitor conditions. Equities rallied on the Fed statement (in part, perhaps, because the meeting was simply out of the way), but global markets weakened after the Bank of Japan failed to stimulate further.The economic data were mostly in line with expectations.
Real GDP rose at a 0.5% annual rate in the advance estimate for 1Q16. Looking at the key details, consumer spending growth was a bit better than expected, while business fixed investment fell more than anticipated (with more than three-quarters of the decline concentrated in energy-related structures).
The early Easter likely had some impact on a number of GDP components, but first quarter GDP growth figures have been softer than average in recent years. The Employment Cost Index rose 0.6% for the three months ending in March, up a lackluster 1.9% year-over-year.
Next week, fresh April figures arrive. The ISM surveys are likely to remain consistent with moderate growth in the near term. Auto sales were likely restrained in March by the early Easter – if so, we should see a healthy bounce-back in April. The Employment Report should show further strength.
Nonfarm payrolls are likely to have risen at a moderately strong pace, limited perhaps by a tighter job market. The unemployment rate should be flat or slightly lower, held up by increased labor force participation.
Consumer Money Rates
As of close of business 04/28/2016
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Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
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 April 28th, 2016.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
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