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Week In Review

Fed Raises Rates

As expected, The Federal Reserve Open Market Committee (FOMC) announced an increase in the target range for the federal funds rate to 0.75% to 1.0%. According to the Fed statement, the labor market showed continued strength and economic activity expanded at a moderate pace. The committee noted that business investment has “firmed somewhat” and that inflation continues to move close to the committee’s 2% longer-run objective.

Our Take

The Fed’s move was highly anticipated given the guiding statements made by Fed members over the past few weeks. The target range remains accommodative but is a positive step toward rate normalization. The Fed maintained its outlook for two additional rate hikes this year, but, as always, remained committed to its data- dependent stance when it comes to any decision on future rate increases.


Producer prices rose by 0.3% in February and by 2.2% year-over-year. Excluding food and energy, producer prices are up 1.5% over the last twelve months. Consumer prices have followed a similar path, rising 0.1% in February and 2.7% over the last year. Consumer prices excluding food and energy rose 2.2% year-over-year.

Our Take

Headline inflation continues to trend above the Fed’s 2.0% target, while core inflation is slightly more subdued. Energy prices hit their lows in February 2016, meaning headline inflation is likely to moderate in coming months. Inflation, while closer to Fed targets, is unlikely to rise rapidly in the near future.

Retail Sales

Retail sales rose 0.1% in February. Sales in January were revised from 0.4% to 0.6%.

Our Take

February sales were weaker than expected, though revisions to January sales more than made up the difference. Despite the weak February report, the consumer appears to be in decent shape.


Industrial production was unchanged in February, while capacity utilization fell from 75.5% to 75.4%. Manufacturing production was up 0.5%, while utility production fell 5.7%.

Our Take

Warm weather led to a reduction in utility production and the flat headline number. The manufacturing sector has been improving slightly in 2017 and will likely add to GDP in the first quarter.


S&P Global Ratings cut Louisiana’s credit rating from AA to AA- this week. S&P also assigned a negative outlook on Louisiana, which indicates another downgrade could occur. S&P cited weak revenue collections due to the downturn in oil prices. In addition, the state’s tax increases are due to expire next year, leading to lower tax collections.

Our Take

This week’s downgrade comes ahead of a bond sale later in March and could lead to increased borrowing costs for the state, which is something Louisiana cannot afford. Louisiana has not recovered from the decline in oil prices that affected many states over the last few years. Louisiana was not as prepared for a potential decline as other oil producing states. Louisiana lawmakers should focus on finding long-term solutions rather than one-time fixes to repair the state budget.