FOMC Continues to Express Uncertainty Over Timing of Interest Rate Increase
April 30, 2015
Senate Rejected Amendments Concerning Sanctions Relief for Iran; Economic Growth in the U.S. Declined in the First Quarter of 2015; FOMC Continues to Express Uncertainty Over Timing of Interest Rate Increase: Personal Income Did Not Grow in March.
- The Senate rejected amendments on Wednesday that would make sanctions relief for Iran contingent upon review and certification that Tehran is no longer a state sponsor of terrorism against Americans. Seven Republicans joined all Democrats to oppose the measure in the vote of 45-54 in agreement with President Obama that the so-called poisoning pill measures that aim to toughen the Iran Nuclear Review Act would threaten the ongoing negotiations between Iran and six world powers. Supporters of the bill, however, including Sen. Marco Rubio (R-FL), claim that they would only support looser economic and nuclear constraints on Iran if the country agrees to accept Israel’s right to exist as a Jewish state. Tougher restrictions on Iran under the currently-debated Iran Nuclear Review Act are faced with bipartisan opposition on the Senate Foreign Relations Committee by both Chairman Bob Corker (R-TN) and ranking member Ben Cardin (D-MD). [Reuters]
Economic Indicators & News
- Economic growth in the United States declined in the first quarter of 2015 to its lowest level since the first quarter of 2014, as GDP was largely stagnant from the end of last year, expanding only 0.2%. Output grew 5.0% and 2.2% in 2014 Q3 and Q4, respectively, but rose by very little in the beginning of this year due to an unusually harsh winter in the Northeast, Southeast, and Midwest, supply chain disruptions due to labor strikes at West Coast ports, and the strong dollar’s negative impact on export prices. Consumption increased 1.9% compared with 6.2% in Q4, investment dropped by 3.4%, and export growth was 2.7% higher, though import growth plummeted from 10.4% to 1.8%. The market expectation was for 1.0% total output growth in Q1. [BEA]
- Yesterday, the Federal Reserve’s Open Markets Committee expressed continued uncertainty over the timing of an interest rate increase due to slow first quarter economic growth, despite earlier targets for a midyear rate increase. Positive economic factors in Q1 included strength in the labor market and rising household incomes and consumer sentiment. Especially concerning to a rate hike in 2015, however, was that increases in business inventories significantly contributed to the marginal 0.2% GDP growth in Q1, which reflects weakness in consumer demand, and is compounded by an increase in the personal savings rate from 4.6% in Q4 to 5.5%. Interest rates will remain at near-zero in the near term. [WSJ]
- Personal incomes did not grow in March in the weakest reading since December 2013, though consumer spending rebounded with an increase of 0.4% as demand for goods and services rose by 1.0% and 0.2%, respectively. On the year, personal incomes are up 3.8% and consumer spending has grown by 3.0%. The market expectation was for 0.2% income growth and 0.5% spending growth. [BEA]