After its two-day meeting, the FOMC held interest rates unchanged, as expected.
Since there was no press conference from chair Janet Yellen, markets were parsing every word of the statement for clues on what the Fed is thinking.
In a client note, Neil Dutta at Renaissance Macro highlighted three important changes to the statement:
- The Fed moved from seeing household and business investment as increasing “modestly” to rising “at solid rates”. It also acknowledged that labour-market slack continues to shrink, despite the slowdown in job creation in August and September.
- Global economic concerns have diminished. The Fed removed the sentence “recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”
- Perhaps most importantly, the Fed is now talking about actually hiking rates. The statement outlined what would determine “whether it will be appropriate to raise the target range at its next meeting.” Previously, it had outlined conditions for keeping rates near zero. And so, reference to its next meeting makes a December hike likely, according to Dutta.
The Fed said it would consider a “wide range of information, including improvement in the labour market and signs of upward inflation pressure.