As the clock ticks closer toward a much-anticipated interest rate increase by Federal Reserve policymakers this year, any shift in wording in a statement from the Fed becomes hyper-scrutinized.
Case in point: Today’s statement from the Fed following the Federal Open Market Committee (FOMC).
Wall Street held its breathe and got more of the same, a reassurance that the central bank will keep its benchmark rate at near zero, where it has been since September 2008, for now.
But there was something amiss in the statement. Specifically, the word “patient.”
Today’s statement from the Fed:
“Consistent with its previous statement, the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting.”
In January, at the same point in the statement, policymakers said the following:
“Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.”
This time, the FOMC took out the language referring to patience when it comes to resuming normal monetary policy, which entails raising rates. Pundits, of course, interpret this as a first step in preparing the world for interest rate hikes, which would send ripple effects through consumer financial products, including mortgages (which remain historically low at under 4 percent for the 30-year fixed.)
Here’s the current statement’s key summary:
“To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation.”
Obviously, reporters couldn’t resist asking Federal Reserve chair Janet Yellen about the missing “patient.”
“Just because we removed the word ‘patient’ doesn’t mean we’re going to be impatient,” Yellen said.