The Fed Flies with the Doves

Research Reports
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The Fed Flies with the Doves
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist

As everyone expected, the Federal Reserve made no direct changes to the stance of monetary policy today, leaving the target range for the federal funds rate at 0% to 0.25%. Also as expected, it made no changes to its commitment to keep short-term interest rates at this level for an “extended period.”

Minor changes to the statement suggest the Fed is, on net, more concerned about economic growth and less concerned about inflation than at the last meeting April. Regarding the pace of economic growth, the changes versus the statement in April, include the following:

(1) The economic recovery is “proceeding” rather than “continued to strengthen.”
(2) The labor market is “improving gradually” rather than “beginning to improve.”
(3) Commercial construction is “weak” rather than “declining.”
(4) Housing starts are at a “depressed level” rather than have “edged up.”
(5) Financial conditions are “less supportive of economic growth” rather than “remain supportive of economic growth.”