May opened with a pair of economic updates that should be pleasing to dealerships and finance companies with interest rates remaining steady and unemployment declining.
The developments came in light of the Federal Reserve chairman refuting thoughts that policymakers are succumbing to political pressure from the White House or other federal lawmakers to make certain decisions regarding interest rates.
According to an announcement made on Wednesday, the Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate at 2.25% to 2.50%. The Fed explained its committee continues to view sustained expansion of economic activity, strong labor market conditions and inflation near the committee’s symmetric 2-percent objective as the most likely outcomes for the U.S economy.
“We’ve just come through a two-day meeting, and we’ve done a deep dive on economic and financial conditions in the United States and around the world and thought about our policy, and we do think our policy stance is appropriate right now,” Federal Reserve chairman Jerome Powell said during a news conference after Wednesday’s announcement.
“We don’t see a strong case for moving in either direction,” Powell continued. “We do, of course though, as a routine matter as you will know, we look not only at our baseline, but we also look at alternative simulations, both better and worse. And we ask ourselves what the appropriate policy response would be, but that’s all we do. And I would just say that we’re comfortable; the committee is comfortable with our current policy stance.”
Then on Friday, the Bureau of Labor Statistics reported non-farm payroll employment increased by 263,000, and the unemployment rate declined to 3.6 percent in April.
The federal agency said notable job gains occurred in professional and business services, construction, health care and social assistance during the month. Officials added the April employment gain compares with an average monthly gain of 213,000 over the prior 12 months.
Curt Long, chief economist for the National Association of Federally-Insured Credit Unions (NAFCU) issued a statement in response to the Labor Department’s April jobs report.
“As has been the case throughout the expansion, the labor market once again proves to be a bastion of support for the economy,” Long said. “The April report brought strong job growth and lower unemployment. Wage growth is comfortably above inflation, and the fact that it failed to tick up serves to stifle any talk of a rate hike.
“The Fed is in a good spot right now, as the warning signs of a recession have abated, but without any fear of economic overheating,” Long continued.
In a separate news release, NAFCU research assistant Dhruv Singh added this assertion could benefit dealerships looking to turn metal and finance companies seeking to fill portfolios.
“Consumers are still in a good position with fairly low debt levels and rising real wages, and the Fed is playing its part in backing off of plans for more rate hikes,” Singh said.
Throughout his news conference, Powell emphasized that the FOMC considers data not political posturing when making monetary policy.
“So, as you know, we are a nonpolitical institution and that means we don’t think about short-term political considerations, we don’t discuss them, and we don’t consider them in making our decisions one way or the other. And what we’re always solving for in our process, in our work, is to carry out our mission which is to extend the economic expansion, keep the labor market strong, and get inflation around 2 percent,” Powell said.
The FOMC meets again on June 18 and 19. Powell explained what happens when members gather, using the most recent meeting as an example.
“So to give you an idea of what our process is like maybe as a way of putting all that in context, so for the past maybe 10 days, all 17 FOMC members will have made extensive preparations, catching up on the latest data, reading all the memos, talking to their colleagues and their staff. We talk to literally thousands of business people and market people and people in the nonprofit sector and the educational sector just to get a better sense of the economy. We put all that together and we come together for two days,” Powell said.
“The first day begins with an economic briefing, which is sort of economic and financial developments in the United States and around the world. That takes up most of the first day and we talk about this in great detail. We go away, we think about that, and we come back and the next day we talk about monetary policy,” he continued. “And in this particular case, we came to a unanimous decision after an extensive discussion that our monetary policy stance is appropriate where it is. And we think our monetary policy stance is in a good place and we’re going to be patient as we consider adjustments.
“And we also see, by the way, the evolving risk picture as very consistent with that outlook. So we don’t feel like the data’s pushing us in either direction. Of course, we’ll not hesitate if we do feel that the data justify moving in either direction. But that’s our process. That’s how we think about things. We don’t think about other factors. We don’t let them into our decision making. We don’t discuss them,” Powell went on to say.