Wednesday, April 29, 2015

News Notes: US GDP Comes in Weak, Fed Holds Rates Down

Today we learn that even anemic 1% GDP forecasts for the first quarter were too high (GDP was .2%) and that the US Fed has no plans to raise interest rates anytime soon. Market reaction so far is a yawn with no big moves in any direction. It just appears the US is mired in very anemic growth and that Fed policy is unlikely to change any time soon. Below are links to various news articles.

CNBC - Consumers Holding on to Wallets

"The first-quarter gross domestic product report put several dents in popular Wall Street economic narratives, none of which bode well for growth ahead.
Worst among current economic fallacies was the notion that consumers, buoyed by big savings at the gas pump, would propel U.S. GDP to higher levels. Rather than spend the savings at the pump, which saw the average price for a gallon of unleaded gas sink below $2 in several states as 2014 drew to a close, consumers saved that money and actually pulled back on their spending pace."
"Following through on indications in March, the Federal Open Market Committee on Wednesday offered no changes to its zero interest rate policy.
Not only did it not hike rates, it also removed all hints for what may lie ahead. Calendar references were deleted completely from the post-meeting statement.
The FOMC indicated after its March meeting that a rate hike in April was unlikely. The U.S. central bank has kept its key funds rate anchored near zero since late 2008, amid the financial crisis.
Officials have indicated a desire to raise rates at some point this year, with the market now anticipating a September increase."

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