Market and economic update: Fed meeting takes place amid a backdrop of softer U.S. economic data

The Fed appears to remain on a path to the end of its zero-interest-rate policy, despite softer U.S. economic data.

The key drivers appear to remain employment and inflation data. Employment data continue to improve, although inflation data have been softer of late. Last week’s roster of data releases included industrial production, housing investment activity, and weekly jobless claims. All three were somewhat weaker than consensus expectations, although they do not point to a significant weakness in U.S. economic activity.

Housing starts fell nearly 18% between January and February, but building permits data indicate the weakness is likely due to weather. In general, the economic data seem to indicate U.S. economic growth in the first quarter of 2015 is likely not as robust as we saw over the last half of 2014, but activity remains positive. We would anticipate upside to economic activity later in the year, with consumer spending potentially benefiting from the weaker commodity price environment and solid employment growth.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

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