Economy Watch: FOMC Mulls Monetary Policy Normalization

By Dees Stribling, Contributing Editor

On Wednesday the Federal Reserve released the minutes of the latest meeting of the Federal Open Market Committee, which was on April 29-30, and the topic at hand was the “eventual normalization of the stance and conduct of monetary policy,” according to those minutes. Monetary policy hasn’t been normal for quite a while now, and investors, economists and other observers have been wondering out loud when that’s going to change.

The committee was at some pains to note that its mere jawboning was just prudent planning, and that “the Committee’s discussion of this topic… did not imply that normalization would necessarily begin sometime soon.” The minutes also said that a staff presentation outlined several approaches to raising short-term interest rates when the time comes, even if Federal Reserve still has a very large balance sheet, a situation that hasn’t ever happened before.

The committee also noted that the economic forecasts reviewed at the April meeting were fairly upbeat, and that an increase in U.S. inflation is probably still years off. FOMC’s next meeting will be in mid-June; at that time, Stanley Fischer, whose nomination to the Fed’s board of governors was confirmed this week by the Senate, will participate in the proceedings.

Architects’ billings down in April

The American Institute of Architects reported on Wednesday that its Architectural Billings Index was 49.6 in April, up from 48.8 in March. Though higher, the April score still reflects a decrease in design activity—just not much of a decrease (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.1 in April, up from the reading of 57.9 the previous month.

The index has been in negative territory for the last two months. As a leading economic indicator of construction activity, it reflects the roughly nine- to 12-month lead time between architecture billings and construction spending. The AIA has added a new indicator measuring the trends in new design contracts at architecture firms, which it believes will provide a signal of the direction of future architecture billings. The score for design contracts in April was 54.6, a positive indicator.

“Despite an easing in demand for architecture services over the last couple of months, there is a pervading sense of optimism that business conditions are poised to improve as the year moves on,” AIA chief economist Kermit Baker notes. “With a healthy figure for design contracts this should translate into improved billings in the near future.”

Wall Street bounced back on Wednesday, with the Dow Jones Industrial Average gaining 158.75 points, or 0.97 percent. The S&P 500 was up 0.81 percent and the Nasdaq advanced 0.85 percent.