FOMC: When Will Rate Hikes Come?

As expected, the Federal Open Market Committee under Ben Bernanke has voted to leave the Fed Funds Rate unchanged at the Target of 0.00% to 0.25%.  The vote was 9 to 1 against a rate hike, again with Hoenig being the dissenting vote.  We all know this is effectively ZERO on the rate front.  We do have some of the comments out of the Fed, but we want to know what you think. Take our polling survey:

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As far as rates, the “Exceptionally Low For Extended Period” remains the mantra and the Discount Rate remains unchanged at 0.75%.  There is a relative downgrade to its economic outlook if you look at what was said.  The ‘economic growth downgrade’ is the note that the economic recovery continues but at a moderate pace.  The big difference between this FOMC call and other is that the FOMC now admits and recognized that the financial conditions outside of the US have become less supportive of economic growth.

They also believe that inflation will remain subdued for some time with the underlying inflation trending down. Household spending is increasing but spending remains at constrained levels.  The FOMC also noted that the labor market is improving gradually although unemployment remains high.  Business spending is up, but firms are still reluctant to make new job hires.

Hoenig was the dissenting vote and said that the “Extended Period” phrase limits the Federal Reserve’s economic policy flexibility in the future.

JON C. OGG