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The Week Ahead: The Federal Open Market Committee Convenes

federal-reserveSuspicions surrounding a possible rate hike have intensified over the past month, but speculation will be put to rest at the Federal Open Market Committee (FOMC) meeting, which is scheduled to take place this week.

During last month’s FOMC meeting, which took place January 31 and February 1, the general consensus was to maintain the target range for the federal funds rate at ½ to ¾ percent. FOMC members also had positive sentiments towards recent indicators of activity in the housing sector. Building starts and permits for single-family housing and sales of existing homes rose moderately during Q4 2016, and real residential investment saw a comeback after two consecutive quarterly declines.

The improvement in consumer sentiment was also viewed as a potentially positive factor in the outlook for spending, although several participants cautioned that an elevated level of sentiment, even if it was sustained, was likely to make only a small contribution to household spending beyond those from income, wealth, and credit conditions.

At a meeting with the Senate Committee on Banking, Housing, and Urban Affairs on February 14, Yellen discussed the state of the economy and how consumer expenditures influenced prices.

“Inflation moved up over the past year, mainly because of the diminishing effects of the earlier declines in energy prices and import prices,” she explained. “Total consumer prices as measured by the personal consumption expenditures (PCE) index rose 1.6 percent in the 12 months ending in December, still below the FOMC's 2 percent objective but up 1 percentage point from its pace in 2015.”

Will the FOMC modify the interest rate policy at their next meeting? Find out on March 14 and 15.

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FOMC Meeting Announcement, Wednesday 2 p.m. EST

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About Author: Mirasha Brown

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