Market Overview

Brusuelas: The Fed Has 'Abandoned' Its Data Dependent Position

Share:
Brusuelas: The Fed Has 'Abandoned' Its Data Dependent Position

The much-anticipated Federal Reserve interest rate decision is in, and U.S. central bankers have decided to maintain the FFR range at 0.25 to 0.50 basis points, while keeping the discount rate at 1.00 percent.

While the Fed did say they see indicators of a strengthening labor market (along with projections of 4.5 percent unemployment by 2018), not all is well. The central bank cut its 2016 GDP forecast to 2.2 percent from 2.4 percent previously, and also said global economic and financial developments pose risk for markets.

Fed Abandons Data Dependent Position

According to RSM Chief Economist Joe Brusuelas, the latest data indicates a strategy shift for Yellen and others. "The Fed has effectively abandoned its data dependent position and adopted a more stylized risk management position," Brusuelas told Benzinga.

Related Link: Economists El-Erian, Dolan React To March Fed Rate Decision

"One gets the sense that with the unemployment rate moving toward 4.5 percent and core inflation moving ahead of the Fed forecast," he admitted, "that the Fed is simply going to risk falling behind the curve due to risks in the external sector and a business cycle that is long in the tooth."

Another aspect of the FOMC's new report is that it lowered its expectations for rate hikes in 2016 to two, from four. Brusuelas said he expects the Fed to move rates in June and December, but that's "difficult to believe" given a June 23 'Brexit' vote in the U.K.

Outside of that, the bank will likely avoid any rate activity during the Presidential election, the economist added.

The Dow and general indices are trading up after the announcement, while the U.S. dollar is down on the day.

Posted-In: Joe BrusuelasAnalyst Color News Top Stories Economics Federal Reserve Markets Analyst Ratings Best of Benzinga

 

Related Articles (FED + BROAD)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
IINDoughertyAssumes34.0
PNRJefferiesInitiates Coverage On
YYUBSUpgrades
ROKUOppenheimerMaintains155.0
IPHIBank of AmericaMaintains80.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Why This China ETF Is Soaring

From CBS To Fathead, Here Are 5 Easy Ways To Track Your 2016 NCAA March Madness Bracket