As expected, the FOMC left interest rates unchanged, and left the door open for a June hike. Whether the threshold is crossed depends on the path of US data between now and then.
The FOMC dropped its reference to global economic and financial developments posing risks, but it noted domestic growth had slowed.
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That would suggest that the probability of a rate hike at the June FOMC meeting will now very much depend on the strength of US data releases in coming weeks. Retail sales are now arguably the most important data release for markets, with the next release due on 13 May.
...GDP tomorrow will also be important. The market consensus is that Q1 GDP rose by 0.7% saar. Within that, the expectation is that personal consumption rose by 1.7% saar. Rates of consumption closer to 2.5-3.0% are probably what the FOMC needs to see to be confident that growth is running at or slightly above trend. In Q1 last year, real private consumption rose by 1.8% saar – but that was in part constrained by the harsh weather conditions as a result of the polar vortex. That was not the case this year, so the FOMC will be keenly watching the path of consumer activity to ascertain whether recent weakness is simply seasonal or whether there is a more lasting moderation in consumer behaviour, with a preference for a higher savings rate. Time will tell.