September 17, 2015
July 29, 2015
September 17, 2015 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For immediate release
Information received since the Federal Open Market Committee met in June indicates July suggests that economic activity has been is expanding moderately in recent months. Growth in household at a moderate pace. Household spending has and business fixed investment have been moderate increasing moderately, and the housing sector has shown additional improvement; improved further; however, business fixed investment and net exports stayed have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey‑based moved lower; survey-based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The 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. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term, term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. 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 Committee 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.
The Committee 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. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently 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.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.
Our summary
What changed
- The FOMC noted that recent global economic and financial developments may restrain economic activity and put downward pressure on inflation in the near term, adding a new risk factor.
- Market-based measures of inflation compensation moved lower, a shift from the previous statement's description of them as low.
- The description of household spending and business fixed investment was upgraded to 'increasing moderately,' and net exports were described as 'soft' rather than 'stayed soft.'
- The vote was no longer unanimous: Jeffrey M. Lacker dissented, preferring to raise the target range by 25 basis points at this meeting.
Implications
The new language on global developments suggests the FOMC is more concerned about external headwinds, which could delay the timing of a rate hike.
The downgrade in inflation compensation and the explicit mention of downward pressure on inflation indicate a cautious stance, likely keeping rates on hold until inflation shows more convincing signs of moving toward target.
The dissent from Lacker highlights internal disagreement, but the majority's decision to hold rates suggests a patient approach.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2015 | 2016 | 2017 | 2018 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 2.1 | 2.3 | 2.2 | 2.0 | 2.0 |
| Unemployment rate | 5.0 | 4.8 | 4.8 | 4.8 | 4.9 |
| PCE inflation | 0.4 | 1.7 | 1.9 | 2.0 | 2.0 |
| Core PCE inflation | 1.4 | 1.7 | 1.9 | 2.0 | |
| Federal funds rate | 0.4 | 1.4 | 2.6 | 3.4 | 3.5 |
Median projections of FOMC participants; previous: June.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
September June median June median
Scroll the chart sideways for the later years.
Press conference
September 17, 2015, 2:30 p.m. ET · Read the transcript
What Yellen said that the statement didn't
- The chair said the median FOMC participant projection for the federal funds rate was about 1½ percent in late 2016, 2½ percent in late 2017, and 3½ percent in 2018.
- The chair said four FOMC participants expected that conditions for raising the target range would not be seen until 2016 or later.
- The chair said the median projection for U.S. real GDP growth was 2.1 percent for 2015 and 2.3 percent for 2016.
- The chair said the median projection for the unemployment rate at the end of 2015 was 5 percent, down 0.3 percent from June.
- The chair said the median projection for inflation was 0.4 percent in 2015, 1.7 percent in 2016, and 2 percent in 2018.
Summary generated automatically from the transcript and the statement.