FOMC Meeting Unlikely to Deliver Interest Rate Hike

The Federal Open Market Committee (FOMC) opens its April meeting on Tuesday and on Wednesday will announce its decision on the policy interest rate. The FOMC last raised the rate a quarter point to a range of 0.25% to 0.5% in December.

No increase is expected to emerge from the April meeting, and the market consensus appears to be that there’s less than a 50% chance of another rate increase until December 2016.

Analysts at Stifel also expect only modest revisions to the statement that was released following the March FOMC meeting.

Stifel’s chief economist, Lindsey M. Piegza, noted:

[T]the Committee likely to downgrade their assessment of overall growth, as well as household spending. … We agree with the market’s assessment and do not expect any further adjustment in rates at the April FOMC meeting.  In fact, the combination of stagnant economic conditions, a still-restrained consumer, and ongoing concerns regarding risks of contagion from developments abroad will make it increasingly difficult for the Fed to raise rates once in the remaining nine months of 2016, if at all.

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In the same note Stifel said it estimates that Tuesday’s S&P/Case-Shiller house price index will rise by 0.80%, slightly above the median estimate of 0.75%. Friday’s report on personal consumption expenditures is forecast to rise by 1.5% year over year, continuing the slow-growth trend for inflation. The Fed’s five-year forward breakeven inflation rate has risen by 360 basis points to 1.64% over the past three months, according to Stifel. That’s still well short of the Fed’s 2% target.