During its meeting yesterday, the Federal Open Market Committee chose not to raise interest rates, stating that although economic activity “is expanding at a moderate pace,” inflation remains low. The Committee also indicated that it is keeping a close eye on the global economy.
"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term."
- The labor market has continued to improve, “with solid job gains and declining unemployment.”
- Labor market indicators show that underutilization of labor resources “has diminished since early this year.”
- Household spending and business fixed investment have been “increasing moderately.”
The FOMC noted that it is “monitoring developments abroad” as well.
Asset purchases. The FOMC communicated that it is “maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.” In the FOMC’s view, by keeping the Committee's holdings of longer-term securities at sizable levels, the policy “should help maintain accommodative financial conditions.”
Federal funds rate. In addition, the FOMC continued to maintain the current, low-target range for the federal funds rate at 0- to .25-percent. As for how long it will maintain this target range, the FOMC stated that it “will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation.” According to the FOMC, this assessment “will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”
The FOMC anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen “some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.” Still, the FOMC anticipates that “even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
FOMC member Jeffrey M. Lacker voted against the action, preferring to raise the target range for the federal funds rate by 25 basis points.
Graphical illustration. In addition to its statement, the FOMC released charts and graphs depicting its economic projections. The chart depicts the economic projections of the individual Federal Reserve Board Members and Federal Reserve Bank Presidents based on the current monetary policy, including the projected change in GDP, unemployment, and inflation.
FOMC member Jeffrey M. Lacker voted against the action, preferring to raise the target range for the federal funds rate by 25 basis points.
Graphical illustration. In addition to its statement, the FOMC released charts and graphs depicting its economic projections. The chart depicts the economic projections of the individual Federal Reserve Board Members and Federal Reserve Bank Presidents based on the current monetary policy, including the projected change in GDP, unemployment, and inflation.
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