FOMC Leaves Interest Rates Unchanged

The Federal Reserve left the Federal Funds Target Rate unchanged at 1.25%. The action was as expected by most economists at the 22 primary dealers, bond firms that trade directly with the central bank.

The brief press release which accompanied the Fed’s action contained the following statement. "The Committee continues to believe that this accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity."

The complete text of the Fed's latest press release can be viewed here.

A review of US monetary policy from 1987 to 2001 by the Federal Reserve Bank of Richmond can be viewed at the Richmond Fed website.

Further discussion by the Richmond Fed of expectations and the term structure of interest rates can be found here.

Chain store sales fell 2.3% last week according to the BTM-UBSW survey. The post Thanksgiving plunge may have been exacerbated by the late timing of the holiday. Icing and snow in the Northeast also have been cited by some retailers as factors behind weak sales.

The one week decline in sales was the largest in two years. In 2000, sales similarly collapsed post Thanksgiving and only recovered when aggressive price discounts at Christmas salvaged the season.

The drop followed a 0.3% rise the prior week and lowered the sales index to its lowest in a year. December sales began the month 1.9% below the November average.

The BTM Leading Indicator of chain store sales rose late last month and the November monthly average was 0.7% (0.8% y/y) above October.

During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.