The Federal Open Market Committee (FOMC) stood still Wednesday as all eyes in the mortgage industry awaited their announcement to leave the federal funds rate at its current level.
With the economic picture on the path of improvement, many in the industry are wondering why the Fed held off this month and when the Committee will actually follow through with one of the four anticipated increases.
The FOMC stated in a press release that economic activity expanded at a moderate pace despite the global economic and financial developments of recent months. In addition, household spending increased and the housing sector has shown further improvement. Meanwhile, job gains have been strong and inflation has begun an upward climb but still runs under the Committee's objective.
"Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 0.25 percent to 0.50 percent," the FOMC stated. "The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation."
The committee said that they expect, with "gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks."
As for future rate increases, the FOMC noted that they will take into account measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments and continue to monitor inflation changes.
"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run," the release said. "However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."
In December, the Fed raised the federal funds rate for the first time in nine years and stated shortly after that they would raise rates four more times in 2016. However, the FOMC has since dialed back on that decision to just two increases.
National Association of Federal Credit Unions (NAFCU) Chief Economist, Curt Long said in response to the Fed's decison, "While the FOMC left interest rates unchanged for now, it is clear that conditions have neared the point that would warrant another rate hike. The labor market is strong, inflation is improving and fears over global growth have dissipated somewhat. Barring an unforeseen setback, NAFCU expects that the committee will raise rates no later than June.”
Click here to view the full release.