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FOMC Meeting Reinforces Lower for Longer

Bond yields were only slightly changed this week with shorter-dated issues declining slightly while longer-term issues (5+ years) added a couple bps.  The Federal Reserve's two-day meeting ended as expected on Wednesday, with only slight changes to the statement accompanying their decision to keep the Fed funds rate target near zero.  The highlight of the meeting was the Committee's updated interest rate outlook, which showed that the vast majority of committee members believe short-term rates will remain near zero for at least three years.  With a clear focus on the health of the labor market, the Fed appears unlikely to consider raising rates until job gains bring the U.S. unemployment rate significantly lower.  The week's economic releases arrived largely as expected, with labor market indicators showing persistent weakness while housing market indicators remained strong, despite falling just short of consensus expectations.

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