The Federal Reserve voted Wednesday not to raise its key interest rate, as central bank officials expressed concern with the pace of economic growth.
The accompanying statement showed some misgivings about an economy that grew just 0.7 percent in the first quarter.
The Fed, however, noted that it believes the weakness won’t last, and gave no indication that it would alter its intentions to raise rates in the future.
“The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term,” the statement said.
Gross domestic product rose 0.5 percent in the first three months of the year, according to an initial estimate published by the European Union’s statistics office on Wednesday.
While policy makers have expressed different views on the sturdiness of the 19-nation economy, June seems to be emerging as the month in which the Governing Council will set the course for a gradual exit from monetary stimulus. ECB President Mario Draghi has characterized the recovery, now in its fourth year, as “solid and broad” as indicators ranging from manufacturing to employment show signs of picking up and inflation approaches the central bank’s goal.
Sainsbury’s has reported lower annual profits amid a “challenging” grocery market and warned it could be five years before it again sees steady growth in earnings.
Shares fell 5.7% on the FTSE 100 after results showed pre-tax profits for the year to 11 March down 8.2% to £503m and Sainsbury’s warned there was no sign of a let-up in the intense competition it faces.
Chief executive Mike Coupe said the UK grocery sector was “one of the most challenging, if not the most challenging, in the world”.
Consumer spending flat for second month in a row, PCE shows
The rate of U.S. inflation slowed in March one month after hitting a five-year peak, reflecting lower prices for gasoline and other consumer goods such as new autos.
The halt last month to the recent rise in inflation could ease pressure on the Federal Reserve to raise interest rates, though the central bank appears on track to increase them within the next few months.
American consumers are holding $1 trillion in revolving credit, mostly in credit card debt. So how well is this segment of consumer debt holding up?
Synchrony Financial – GE’s spin-off that issues credit cards for Walmart and Amazon – disclosed on Friday that, despite assurances to the contrary just three months ago, net charge-off would rise to at least 5% this year. Its shares plunged 16% and are down 27% year-to-date.
Credit-card specialist Capital One disclosed in its Q1 earnings report last week that provisions for credit losses rose to $2 billion, with net charge-offs jumping 28% year-over-year to $1.5 billion.
Synchrony, Capital One, and Discover – a gauge of how well over-indebted consumers are managing to hang on – have together increased their Q1 provisions for bad loans by 36% year-over-year. So this is happening.