The Federal Reserve on Wednesday acknowledged that the economy has weakened, stating in its monetary policy announcement that it “slowed during the winter months, in part reflecting transitory factors.”
The central bank reiterated, however, that it expects the economy to continue to grow at a “moderate pace” despite the slowdown in the first quarter of the year.
The central bank’s assessment of economic growth is closely watched by investors because the Fed has conditioned its plans to raise short-term interest rates on further economic growth.
The Fed’s relatively uneventful announcement came at the conclusion of a two-day meeting of its monetary policy committee in Washington.
Over the past several months, Chairwoman Janet Yellen and other Fed officials have been preparing to raise its target for short-term interest rates from zero for the first time since 2008.
This week’s meeting was the last at which the Fed has said there will be no rate increase.
But recent signs that the economy is underperforming suggest that the timing of the rate increase is not likely to come at the Fed’s next meeting in June.
Economic output, as measured by gross domestic product, grew at just an 0.2 percent annual rate in the first quarter, the Bureau of Economic Analysis announced in its first estimate Wednesday morning.
Job growth also slowed in March, with the economy adding a weak 129,000 jobs in the month, according to the first estimate from the Bureau of Labor Statistics. The number of jobs created in January and February was also revised down by 69,000 in total.
Recent bond market prices indicate that investors are not expecting the Fed to raise its target rate until after September. The short-term interest rate set by the Fed affects rates on credit instruments throughout the economy, including mortgages, student loans, and credit cards.
The Fed has specifically said that the decision to raise rates will depend on continuing employment growth and inflation rising toward the Fed’s 2 percent target. Inflation has been rising at a 1.4 percent annual in the gauge preferred by the Fed.
The statement Wednesday took note of one of the biggest factors weighing on the U.S. economy in the early months of 2015, namely the strengthening dollar. Aso other advanced economies, including the euro zone, have seen their central banks move to loosen money, the dollar has gained relative to other currencies, while at the same time oil prices have collapsed.
The result has been slowing business for U.S. manufacturers who export out of the U.S. Meanwhile, the lower cost of imports has depressed inflation.
There were no dissents among Fed officials to Wednesday’s monetary policy decision.
