Fed Keeps Rates on Hold Again


The Federal Open Market Committee (FOMC) at the Federal Reserve Bank decided to leave the Federal Funds rate unchanged today at .25%-.5% as expected. It was only 2 weeks ago market participants were anticipating a 25 basis point increase, then came a weak May jobs number, the Chinese devaluing the Yuan as a signal to the Fed to hold steady, the Brexit vote in the UK tilting towards the leave side, and ongoing below potential performance of the U.S economy.

In their accompanying statement the Fed finally recognizes that which has been obvious for some time; the labor market isn't getting stronger. The Fed said "labor market improvement has slowed." That is Fed speak for a weak labor market. It proves that the U3 Unemployment Rate of 4.9% is of little meaning in today's U.S. economy. The Fed knows the more appropriate measure is the U6 rate which shows an unemployment rate of 9.7%.

The Fed remains in an accommodative stance, and will continue until there is further improvement in labor market conditions and consumer inflation rises to 2%.

FOMC statement in full: http://www.federalreserve.gov/newsevents/press/monetary/20160615a.htm

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