The most important part of today's statement from the Federal Reserve is that it thinks the slow economic growth in the first quarter is temporary. As a result, the market consensus on the odds of a rate hike by June rose to about 94% after the meeting from about 67% beforehand.

The Fed made other relatively minor changes to its statement, but nothing that should change anyone's impression of where the Fed is headed. The Fed noted slower consumer spending recently, but said the "fundamentals" supporting consumer spending "remained solid." No one dissented from the statement, which suggests that even the "doves" are on board with further rate hikes.

Our forecast has not changed. We expect a rate hike in June another in September – 25 basis points each – and then the beginning of (gradual) asset sales in the fourth quarter. None of this will damage the economy. Job growth remains healthy and nominal GDP – real GDP growth plus inflation – has grown at a 3.4% annual rate in the past two years.


This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but no guarantee is given to its accuracy.

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