June 14, 2017
The FOMC followed their script and raised the funds rate one notch to a still low 1.00 to 1.25 percent range. But the day's economic data don't point to much need for higher rates as consumer prices actually fell 0.1 percent in May with the less food and energy core rate rising a lower-than-expected 0.1 percent. And retail sales in May were unusually weak, down 0.3 percent overall and showing falling consumer demand for most categories.
Janet Yellen in her press conference pointed to "one-off" factors in the consumer price report especially the fall underway in cell phone plans and stressed that low rates of unemployment point strongly to an uplift for inflation in the months ahead.
Stocks were mixed in reaction to the FOMC with the Dow up 0.2 percent to a new record at 21,374 though other indexes edged lower. The 10-year Treasury yield edged lower, down several basis points to 2.34 percent yet the 2-year yield, though little changed on the day at 1.34 percent, did rise several basis points from session lows following the announcement. Likewise the dollar index was little changed on the day, at 96.90, but did move higher at mid-afternoon. Oil, following another draw in weekly inventories, fell a sharp $1.75 to end near $44.75 in a move that won't be helping the FOMC meet its inflation goal.