As expected, the policymakers at FOMC kept policy rates unchanged yesterday. Let’s take a look at the FOMC statement for future clues. Current Federal funds rate target 75-100 basis points.

Let’s first assess the bias in monetary policy statement –

• Improvement in the labor market strengthened, despite a slowdown in economic activity. (Neutral bias)
• Declining unemployment rate and solid job gains (Neutral bias)
• Growth in household spending rose only modestly, but the fundamentals underpinning continued consumption growth remains solid. (Mild hawkish bias)
• Business fixed investment firmed. (Mild hawkish bias) Inflation measured on a 12-month basis recently has been running close to the Committee's 2 percent longer-run objective. Excluding energy and food, consumer prices declined in March and inflation continued to run somewhat below 2 percent. (Mild hawkish bias)
• Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. (Mild dovish bias)
• FOMC views the slowing in growth during the first quarter as likely to be transitory. (Mild Hawkish bias)
• FOMC expects inflation to reach 2 percent objective over the medium term as economic activity improves and labor market strengthens. Near term, risks balanced.(Neutral bias)
• Fed is closely monitoring the global economic and financial developments as well as measures of inflation. (Neutral bias)
• The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate and the rate to remain below longer run levels. (Neutral bias)

The statement is much more hawkish compared to the March statement, which probably indicates that it is keeping its options open for two more rate hikes in 2017 but subsequent hikes would depend on how economic conditions develop and also on the government’s fiscal stance.

The decision was unanimous. The next FOMC meeting is in June.