WASHINGTON — In its most upbeat economic assessment since the recession, the Federal Reserve cited “solid” economic growth and “strong” job growth in a statement issued Wednesday that suggested the Fed remains on course to raise its benchmark interest rate as soon as June.
The optimistic tone of the statement was leavened, however, by the Fed’s acknowledgment that inflation remains unusually sluggish, and that prices are likely to rise even more slowly in the coming months, largely because of lower energy prices.
But the statement issued by the Federal Open Market Committee reiterated that Fed officials expect inflation to rebound “as the labor market improves further and the transitory effect of lower energy prices and other factors dissipate.”
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“We believe the FOMC would risk entrenching inflation expectations at levels inconsistent with its 2 percent goal if it were to push forward with rate hikes as early as June,” Morgan’s economic forecasters wrote in a research note, referring to the Fed’s policy-making Federal Open Market Committee.
Measures of market expectations derived from asset prices suggest that investors share this skepticism. By Morgan Stanley’s reckoning, prices reflect an expectation that the first rate increase will not happen until after the Fed’s September meeting.
