Fed announcement May 3, 2017

The Fed announcement for May 3, 2017 was pretty much what most people expected to hear from the FOMC.  Sometimes these announcements bring surprises and the markets go crazy; this was not the case for today.  In fact one could argue that the May 3, 2017 announcement from the Fed was a bit of a snoozer.  Janet Yellen Overall the statement was dovish as it didn’t say anything the market wasn’t expecting.  

A “dovish” tone to the Fed announcement today means there wasn’t anything overly aggressive in the statement that would lead to investors to fear the FOMC might do something overly aggressive (an overly aggressive statement is a “hawkish” statement).  The Fed recognized that the economy has seen some slower growth but believes it’s offset by solid job gains.  

They further stated that household spending has slowed but but business investment improved somewhat.  There has been a short term decline in food and energy prices (deflation?) however the Fed was not too concerned about that.  They believe the slowing in growth is just transitory and should correct its self as time goes on.  Forward guidance remained the same and there was no new news of bond reinvestment’s.

Mortgage rates didn’t budge much after the Fed announcement today; there was some selling in the Mortgage Backed Securities (MBS) market but nothing significant.  The low California refinance mortgage rates and purchase mortgage rates we’ve seen today should finish out the day flat however a few lenders may worsen just a tad and that may have more to do with lock volume for the day.

Here are the news wire bullet points for the FOMC statement:

  • FED KEEPS TARGET INTEREST RATE UNCHANGED AT 0.75-1.00 PCT
  • FED SAYS SLOWDOWN IN FIRST-QUARTER GROWTH LIKELY TO BE “TRANSITORY,” STILL EXPECTS ECONOMY TO EXPAND AT MODERATE PACE
  • FED SAYS BUSINESS FIXED INVESTMENT HAS FIRMED, JOB GAINS HAVE BEEN SOLID AND FUNDAMENTALS FOR CONSUMPTION GROWTH ALSO SOLID
  • FED SAYS INFLATION MEASURED ON 12-MONTH BASIS HAS BEEN RUNNING CLOSE TO TARGET
  • FED REPEATS NEAR-TERM RISKS TO THE ECONOMY APPEAR “ROUGHLY BALANCED”
  • FED REPEATS IT WILL REINVEST PRINCIPAL PAYMENTS FROM ITS HOLDINGS UNTIL RATE NORMALIZATION IS WELL UNDER WAY
  • FED VOTE IN FAVOR OF POLICY WAS UNANIMOUS