Washington, D.C. — Michael Madowitz, economist at the Center for American Progress, released the following statement today on the Federal Open Markets Committee (FOMC) meeting that concluded today:
As expected, there was no change in interest rates at this week’s FOMC meeting. The Federal Reserve announced it will begin winding down its balance sheet ‘relatively soon,’ widely seen as a signal that the Fed will tighten via the balance sheet in its next meeting, in lieu of a September rate hike. Over the past few months, a weakening dollar has been a healthy tailwind for the U.S. economy, while labor markets and inflation both show no signs of strain. Judging by the Fed’s dual mandate of maximum employment and stable prices, no change in rates is arguably hawkish, even without this balance sheet signal—the economy is still well below the Fed’s 2 percent inflation target—with little indication it will near that target soon.
With President Donald Trump’s first Fed nominee Randal Quarles’ Senate confirmation hearing tomorrow, today’s FOMC statement is reminder that American workers are likely to pay a price for congressional Republican leaders’ desire to weaken financial regulation. This hawkish posture, even while the Fed undershoots its inflation target, is an indication that the Fed is accepting that it will have to use monetary policy to compensate for lax financial regulation—even at the expense of a healthier economy. The labor market remains healthy, and the combination of low inflation and a modest pace of job growth indicates the Fed should not be trying to slow it down.
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