December 13, 2017
JYJanet L. YellenDecember 13, 2017 FOMC Press Conference
- The chair said the economy grew at a solid 3¼ percent pace in the second and third quarters of the year.
- The chair said job gains averaged 170,000 per month over the three months ending in November, well above the pace needed to absorb new labor force entrants.
- The chair said the median projection for the federal funds rate is 2.1 percent at the end of 2018, 2.7 percent at the end of 2019, and 3.1 percent in 2020.
- The chair said the statement no longer mentions the balance sheet normalization program because it is proceeding, and the Fed would resume reinvestments only if a material economic deterioration warranted a sizable rate cut.
- The chair said participants generally factored in prospective tax policy changes as boosting both consumer and capital spending, with some potential to boost aggregate supply, but with considerable uncertainty about the effects.
From the opening statement
Press conference
CHAIR YELLEN. Good afternoon. Today the Federal Open Market Committee decided to raise the target range for the federal funds rate by ¼ percentage point, bringing it to 1¼ to 1½ percent. Our decision reflects our assessment that a gradual removal of monetary policy accommodation will sustain a strong labor market while fostering a return of inflation to 2 percent, consistent with the maximum employment and price stability objectives assigned to us by law. Before saying more about our decision, I’ll review recent economic developments and the outlook.
Following a slowdown in the first quarter, economic growth stepped up to a solid 3¼ percent pace in the second and third quarters of the year. Household spending has been expanding at a moderate rate, business investment has picked up, and favorable economic conditions abroad have supported exports. Overall, we continue to expect that the economy will expand at a moderate pace. While changes in tax policy will likely provide some lift to economic activity in coming years, the magnitude and timing of the macroeconomic effects of any tax package remain uncertain.
Smoothing through hurricane-related fluctuations, job gains averaged 170,000 per month over the three months ending in November, well above estimates of the pace necessary to absorb new entrants to the labor force. The unemployment rate has declined further in recent months and, at 4.1 percent in November, was modestly below the median of FOMC participants’ estimates of its longer-run normal level. Broader measures of labor market utilization have also continued to strengthen. Participation in the labor force has changed little, on net, over the past four years. Given the underlying downward trend in participation stemming largely from the aging of the U.S. population, a relatively steady participation rate is a further sign of improved conditions in the labor market. We expect that the job market will remain strong in the years ahead.