June 17, 2015 FOMC Press Conference

Press conference

CHAIR YELLEN. Good afternoon. Today the Federal Open Market Committee reaffirmed the current 0 to ¼ percent target range for the federal funds rate. Since the Committee last met in April, the pace of job gains has picked up and labor market conditions have improved somewhat further. Inflation has continued to run below our longer-run objective, but some of the downward pressure on inflation resulting from earlier sharp declines in energy prices is abating. The Committee continues to judge that the first increase in the federal funds rate will be appropriate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. At our meeting that ended today, the Committee concluded that these conditions have not yet been achieved. It remains the case that the Committee will determine the timing of the initial increase in the federal funds rate on a meeting-by-meeting basis, depending on its assessment of incoming economic information and its implications for the economic outlook. Let me emphasize that the importance of the initial increase should not be overstated: The stance of monetary policy will likely remain highly accommodative for quite some time after the initial increase in the federal funds rate in order to support continued progress toward our objectives of maximum employment and 2 percent inflation. I will come back to today’s policy decision in a few moments, but first I would like to review recent economic developments and the outlook.

The U.S. economy hit a soft patch earlier this year; real gross domestic product looks to have changed little in the first quarter. Growth in household spending slowed, business fixed investment edged down, and net exports were a substantial drag on growth. Part of this weakness was likely the result of transitory factors. Despite the soft first quarter, the fundamentals underlying household spending appear favorable, and consumer sentiment remains solid. Looking ahead, the Committee still expects a moderate pace of GDP growth, with continuing job gains and lower energy prices supporting household spending.

The labor market data so far this year have shown further progress toward our objective of maximum employment, although at a slower pace than late last year. Over the past three months, job gains have averaged about 210,000 per month, down from an average pace of 280,000 per month over the second half of last year, but still well above the pace consistent with trend labor force growth. Although the unemployment rate, at 5.5 percent in May, was unchanged from the latest reading available at the time of our April meeting, the labor force participation rate edged up. A broader measure of unemployment that includes individuals who want and are available to work but have not actively searched recently and people who are working part time but would rather work full time has continued to improve. But it seems likely that some cyclical weakness in the labor market remains: The participation rate remains below most estimates of its underlying trend, involuntary part-time employment remains elevated, and wage growth remains relatively subdued. So, although progress clearly has been achieved, room for further improvement remains.