The Federal Open Market Committee (FOMC) decided yet again today to hold off on raising the target federal funds rate.

Not much changed in the language of the FOMC statement, with the Fed believing that the labor market continues to strengthen and that economic activity is picking up.

The FOMC continues to see economic activity expanding, the labor market strengthening, and thus a stronger case for an increase in the federal funds rate. Perhaps the only shocking part of today’s FOMC statement was that there were three dissensions from the decision.

Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester, and Boston Fed President Eric Rosengren all dissented, each favoring a rise in the federal funds rate to 1/2 to 3/4 percent.

While there had been some discussion of a surprise rate rise today, and the dissent of three FOMC members shows indications that a rate rise may very well be around the corner, news of today’s Bank of Japan monetary policy action may have also played a role in the Fed’s decision not to raise rates today.

Tightening monetary policy, no matter how loose it still remains, while other central banks continue to loosen, will only exacerbate the effects of the Fed’s actions.

Perhaps the Fed is just taking a wait and see approach to see what happens in Japan and Europe before it decides to go ahead with another rate hike. Let’s hope that someone asks that question in this afternoon’s press conference.


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