A very cautious Fed is more confident about the economy, but global headwinds are raising uncertainty about rate hikes.
The Federal Open Market Committee (FOMC) kept rates unchanged on March 16, to no one’s surprise. It also noted that it sees rates rising even more slowly than it had indicated in December.
The committee said the U.S. economy has been “expanding at a moderate pace,” but “global economic and financial developments continue to pose risks.” The latter, a new addition to the statement, seemed to outweigh the positives, making for a more dovish Fed.
“What they’re saying to me is they have some concern of the U.S. dollar getting too strong if they move prematurely,” says Michael Gregory, Deputy Chief Economist at BMO.
“To the extent the Fed continues a little bit more cautiously than expected, that’s not a favorable development for Canada.”
