Fed Monetary Policy Report: GDP on track to rise moderately in Q2

In its semi-annual Monetary Policy Report, the US Federal Reserve said that the Gross Domestic Product (GDP) appears to be on track to rise moderately in the second quarter, per Reuters.

Additional takeaways

"Our commitment to restoring price stability is unconditional."

"Most recent indicators suggest that private fixed investment may be moderating, but consumer spending remains strong."

"Vulnerabilities from nonfinancial leverage are moderate."

"Leverage in the financial sector appears moderate and little changed this year."

"Recent market strains for stable coins and other digital assets show structural fragilities in that rapidly growing sector."

"We are strongly committed to restoring price stability, necessary for sustaining a strong labor market."

"Further risks to global supply chains abound."

"Rapid growth of labor costs is putting upward pressure on the prices of all labor-intensive services."

"About one-half of decline in labor force participation rate since pandemic began is due to baby-boom generation reaching retirement age."

"Some possible signs of modest easing of labor market tightness have recently appeared."

"Some measures of wage growth appear to have moderated."

"If gap between wage growth and productivity growth remains comparably wide in the future, there will be significant upward pressure on firms’ labor costs."

"Broad funding markets proved resilient to geopolitical tensions."

"With direct exposures of US financial institutions to Russia and Ukraine being small, financial spillovers have been limited to date."

"High inflation, supply chain disruptions, and the ongoing geopolitical tensions remain substantial sources of uncertainty with the potential to further stress the financial system."

Market reaction

The dollar preserves its strength ahead of the weekend and the US Dollar Index was last seen rising 1% on the day at 104.85.