Members of the Federal Open Market Committee released their latest policy statement Wednesday which was little changed from June.
In light of recent commentary from members this indicates the Fed remains on track to raise rates this year. A hike could come as soon as September, when the committee will hold its next official meeting, or December, the only other meeting of the year followed by a press conference with Chair Janet Yellen.
The policy portion of the statement now reads: "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term." The only change here was the addition of the word "some."
Previous statements indicated the Fed is gearing up to begin raise short-term rates from the near zero level they've now held for close to 80-months. But the launch date has kept moving back. In recent public comments, however, FOMC members have struck an increasingly hawkish tone.
Speaking before Congress in mid-July Yellen noted, "If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy. Indeed, most participants in June projected that an increase in the federal funds target range would likely become appropriate before year-end."
Changes to the committee's economic outlook were also minimal. They still judge economic activity is expanding "moderately" and now see net improvements in the "solid" labor market. The view than inflation "remains low" was unchanged. Between now and the next Fed meeting in mid-September there will be two new reports each on employment and second quarter gross domestic product. (This includes the Bureau of Economic Analysis's advance estimate of Q2 GDP Thursday.)
In a note on the statement Joseph Lake, global economist for The Economist Intelligence Unit, wrote, "The economic indicators are finely balanced, and the Fed could move in September or December. Much depends on the strength of the bounce-back in economic growth in the second quarter and the pace of wage increases in July and August. The economy would not need to disappoint by much for a dovish Fed to push the rate increase back until December."
U.S. equity markets, which had been mostly positive through the earlier trading day, popped immediately following the 2 p.m. release before returning closer to the day's range. The S&P 500 and the Dow Jones Industrial Average were up around 0.4%. The Nasdaq Composite was close to flat.
Meanwhile the yield on the 10-year Treasury note was at 2.29%, after spending the earlier part of the day between 2.27% and 2.30%. The VIX, a volatility measure from the Chicago Board Options Exchange, was at around 12.92 from a high for the day of 13.59 shortly after trading opened.
