The Federal Open Market Committee repeated Wednesday that “it can be patient in beginning to normalize” monetary policy, but members declined to predict when they might be ready to raise the federal funds rate from the current zero to 0.25% target range, said a statement at the end of a two-day meeting.
At the committee’s December meeting, “most participants thought the reference to patience indicated that the committee was unlikely to begin the normalization process for at least the next couple of meetings,” according to the minutes. Information since then suggests economic activity expanding “at a solid pace,” the latest statement said. But even if employment and inflation indicators continue to improve, committee members said, “economic conditions may for some time warrant keeping the target federal funds rate” below normal.
The latest statement from the committee “just kind of pushes out the big questions to another day,” said Sam Diedrich, director and portfolio manager for Pacific Alternative Asset Management Co., which manages $9 billion in assets. While “long-end bonds are rallying a little bit, other markets are pretty untouched,” he said.
“The biggest question hanging over all markets is the dichotomy between projected growth in the U.S. and the rest of the world,” said Mr. Diedrich. “I think that is what is weighing on markets. That’s why you are seeing a flattening on the curve in the U.S. bond market. The market is essentially saying, (the Fed) may raise rates a little … but the rest of the world is still fighting.”