Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

Fed meeting press conference IMPORTANT “key quotes”

“The economy has made considerable progress toward dual goals.”

“Inflation eased substantially over the past year but it’s still too high.”

“Further progress on inflation is not assured; the path is uncertain.”

“Restrictive stance has put downward pressure in inflation, economy.”

“Risks to achieving dual goals have moved into better balance over the past year but inflation has shown lack of progress.”

“We are highly attentive to inflation risks.”

“Private domestic final purchases were as strong as second half of last year.”

“That is an important underlying signal for demand.”

“Labor market remains relatively tight.”

“Nominal wage growth has eased over the past year but labor demand still exceeds supply.”

“Inflation data received this year have been higher than expected.”

“Longer term inflation expectations remain well anchored though.”

“Our policy actions are guided by our goals.”

“Monetary policy actions are guided by dual mandate.”

“The economic outlook is uncertain.”

“We do not expect it will be appropriate to cut rates until have greater confidence on inflation moving toward 2%.”

“So far this year, inflation readings have not given us that greater confidence.”

“Likely that gaining greater confidence will take longer than previously expected.”

“Reducing policy too soon or too much or too late or too little both have risks.”

“Policy is well positioned to deal with risks and uncertainties we face.”

“We will make decisions meeting by meeting.”

“Slowing pace of QT does not mean our balance sheet will shrink less than it would otherwise.”

“Slowing the pace of runoff will ensure a smooth transition for money markets.”

“The decision to slow runoff will reduce the possibility of money market stress.”

“I do think policy is restrictive and is weighing on demand.”

“You can see that with the labor market.”

“Saw evidence of that today in the JOLTS report.”

“Quits and hiring rates have normalized.”

“We believe over time policy is sufficiently restrictive to bring inflation back down to 2%.”

“The data will show if that’s so.”

“Unlikely that next policy rate move would be a hike.”

“Policy focus is on how long to keep policy restrictive.”

“To hike, we’d need to see evidence policy is not sufficiently restrictive — that’s not what we see.”

Key takeaways from Fed policy statement

“Fed maintains mortgage-backed securities redemption cap at $35 billion per month, will reinvest excess MBS principal payments into Treasuries.”

“Risks to achieving employment and inflation goals have moved toward better balance over the past year.”

“Inflation has eased over the past year but remains elevated.”

“Fed vote in favor of policy was unanimous.”

Market reaction to Fed policy announcements

The US Dollar came under modest bearish pressure with the immediate reaction. At the time of press, the US Dollar Index was down 0.2% on the day at 106.08.

April’s report may not generate any concerns about the US labor market. A growth of 243k compared to 303k in March would still be an outsize jump and perhaps an encouraging sign that the labor market can handle the increased migrant inflows, especially if the unemployment rate remains stable and below 4% for the 27th consecutive month – the longest stretch since the 1960s.

It’s worthy to note that the ISM business survey has been pointing to contracting employment conditions since the start of the year. But given its somewhat broken correlation with the NFP report and the healthy number of weekly initial jobless claims, there is little risk for employment growth disappointing significantly below 200k. Moreover, excluding the pandemic’s huge loss, April’s readings have been comfortably above that threshold since 2018. Perhaps if the Q1 GDP slowdown stretches into the next quarters, employers might start trimming demand for workers. In other metrics, wage growth might attract special attention after the Bureau of Labor statistics revealed a higher-than-expected compensation increase of 1.2% in Q1 versus 0.9% at the end of December 2023. The annual change has stabilized at 4.2%, though this is still comfortably above the pace of 3.5% which the Fed considers more consistent with achieving its price stability target. Therefore, if April’s average hourly earnings surprise to the upside or appear more sticky, there will be less need for a rate cut.