Slow Growth, Soft Start for Q1 2017

Blog posted On May 11, 2017

Last week, the Federal Open Market Committee (FOMC) voted to leave the benchmark interest rate unchanged due to slowed growth in the first quarter of 2017.  The soft start does not necessarily translate into economic weakness.  Last week’s solid April jobs report and the onset of home buying season can trigger economic momentum. 

In its written statement, the FOMC acknowledged the slowed growth but insisted it will “likely be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term.”

The FOMC went on to dismiss the concern about the 0.7% GDP growth rate at the end of the first quarter.  Initial jobless claims remain under the 300,000 threshold, for the 113^th straight week.  Continuing jobless claims were under 2 million, the lowest level since 1988.  The monthly job report showed hiring rebounding from March to April up from 79,000 to 211,000.  The unemployment rate dropped 0.1% to 4.4%. 

The strong jobs report strengthens the cause for a June rate hike.  At the end of 2016, the FOMC forecast two rate hikes for this year. 

Sources: CNBC, MarketWatch, MarketWatch, Reuters