(August 22 – 17:45 ET) – As expected the U.S. Federal Open Market Committee left interest rates unchanged and decided to “maintain the existing stance of monetary policy”.
The Fed policy statement observed that a slowing does appear to be in the works, “Recent data have indicated that the expansion of aggregate demand is moderating toward a pace closer to the rate of growth of the economy’s potential to produce. The data also have indicated that more rapid advances in productivity have been raising that potential growth rate as well as containing costs and holding down underlying price pressures.”
However, as expected the Fed declined to sound the all clear on rates, “Nonetheless, the Committee remains concerned about the risk of a continuing gap between the growth of demand and potential supply at a time when the utilization of the pool of available workers remains at an unusually high level.”
Instead the Fed is maintaining its tightening bias, “Against the background of its long-term goals of price stability and sustainable economic growth and of the information currently available, the Committee believes the risks continue to be weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.”
The Fed is widely expected to keep a low profile during the U.S. election, and will likely not be heard from until November.
The on-target result sparked little market reaction, stocks remain decidedly on the upside after some initial selling.