Not much to write home about with respect to the April FOMC statement. As widely expected, the FOMC continues to taper USD 10 billion and will now be buying bonds to the tune of USD 45 billion a month, starting in May. Bond-buying will be concluded at the October meeting and the first rate hike will come in the middle of 2015 according to our forecast.
The Fed basically focused on recent better economic news, rather than the winter dip. While acknowledging the exceptionally weak performance in the first quarter, the future is looking brighter according to the FOMC — economic activity “has picked up recently”. Consumer spending appears to be rising more quickly while labor market indicators are showing further improvement on balance. The upgrade to the consumer was counteracted by the downgrade in business fixed investment which edged down. The recovery in the housing sector remained slow.
There were no dissents this time around as Kocherlakota decided to vote with the majority. Not much market action either after the statement, as we understand it.
SEB