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6/23/2014
Last week, the market showed positive signs. After decreased by 0.3% in April, industrial production grew by 0.6% in May. Core CPI increased by 1.9%, the highest growth since August, 2011. After a surge of 12.7% in April, new residential construction decreased by 6.5% in May, still 9.4% more than the same period last year. Initial claims of unemployment fell slightly by 6000, while 4-week moving average declined as well. Philadelphia Fed survey also displayed relatively strong economic growth within its jurisdiction.
On Wednesday, Fed released FOMC statement which met expectations: Interest rates remain unchanged and continue to reduce the monthly asset purchases by 10 billion to 35 billion U.S. dollars, while the Fed sharply lowered this year's economic growth forecast from 2.8-3% in March down to 2.1-2.3%. However, most of the officials still expect that the Fed will increase the short-term interest rates in the next year, but the market showed little reaction. On Friday, the 10-year Treasury rate was 2.60%, almost the same compared to the prior week.