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Market CommentariesThe Federal Reserve Stands Pat, As Expected

The Federal Reserve, as transparent as ever, again did the expected when it voted to maintain the current level of interest rates on short-term borrowings. That decision came at the conclusion of its two-day FOMC meeting, which ended at 2:00 PM (EDT) this afternoon. Few had expected the bank to tighten the monetary aggregates. It had done so at its previous meeting, in mid-March.

In opting to stay the course, the Fed acknowledged that economic growth had slowed somewhat recently. All told, the bank voted, in unanimous fashion, to keep its benchmark rate at 0.75% to 1.00%. The rate, also known as the federal funds rate, is used as a guide for a variety of consumer debt instruments, including credit cards and adjustable-rate loans.

The accompanying Fed statement, meanwhile, showed concerns about the pace of economic growth, which slowed to a crawl in the first quarter, with GDP adding a scant 0.7%--a third of the forecast rate. The latest Fed statement ran counter to earlier musings, which had suggested that aggressive fiscal policy in Washington, including possible tax cuts, might boost the pace of growth.

Still, the statement did say that it expected this anemic first-quarter growth pace to speed up later in the year. That quickening in growth likely will start to take hold in the current three-month span. Meantime, the Fed has raised rates twice since the election and three times since December of 2015. And we think it will do so two more times this year.

The next Fed meeting, meanwhile, is in June. Expectations are that the bank will hike borrowing costs at that time, although today's cautionary statement raises some doubts in that regard. Finally, the statement acknowledged that business investment had firmed even as the consumer had shown caution. All told, we think a rate hike is possible in June, but not yet probable.

As to the stock market reaction, there was little of note, with the leading averages all lower going into the 2:00 PM adjournment and remaining in the loss column in the minutes afterwards.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.

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