September 2015 FOMC Minutes Highlighted Economic Growth



The state of the US economy

The US economy rose by 3.9% in 2Q15, according to the third estimate by the Bureau of Economic Analysis on September 25. This was good news and an improvement from the 3.7% pace in the second estimate and the 2.3% pace in the advance estimate.

The September 2015 meeting statement had termed the expansion in economic activity as “moderate.” It used the same term to describe an increase in household spending and business fixed investment.

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The Fed’s outlook

The Federal Reserve, according to the September 2015 minutes, revised down its projections on US economic growth from the projections it had made in the July 2015 meeting. Though the projection for 2H15 didn’t change much, the Fed lowered projections for subsequent years. It viewed the recent rise in economic activity as positive. However, an appreciation in the US dollar, which led to companies like Groupon (GRPN), Pfizer (PFE), and Omnicom Group (OMC) to warn investors about a revenue hit in 2015, was seen as negative.

FOMC participants’ outlook

The economic growth in the US in 1H15 was better than FOMC (Federal Open Market Committee) participants expected in June 2015. The September 2015 minutes showed that participants continued to believe that “with appropriate policy accommodation, the pace of expansion of real activity would remain somewhat above its longer-run rate over the next two years and lead to further improvement in labor market conditions.”

Impact on mutual fund investors

Strong economic growth is good for investors in diversified mutual funds like the T. Rowe Price Growth Stock (PRGFX) and the Hartford Capital Appreciation A (ITHAX). However, investors should consider the fact the net exports will continue to put pressure on the US economy if the global economy weakens further. This would negatively impact exporters’ stocks, and thus, these funds.

Further strengthening in the US dollar or a fall in domestic consumption in the US will warrant a rebalancing decision from investors. In the next article, let’s look at what the Fed and FOMC participants had to say about inflation.


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