February 01, 2017
December 14, 2016
Statement·Presser·Minutes·Policy
JYJanet L. YellenFebruary 1, 2017 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EST
Information received since the Federal Open Market Committee met in November December indicates that the labor market has continued to strengthen and that economic activity has been expanding continued to expand at a moderate pace since mid-year. pace. Job gains have been remained solid in recent months and the unemployment rate has declined. stayed near its recent low. Household spending has been rising continued to rise moderately but while business fixed investment has remained soft. Measures of consumer and business sentiment have improved of late. Inflation has increased since earlier this year in recent quarters but is still below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. objective. Market-based measures of inflation compensation have moved up considerably but still are remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months. balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and pace, labor market conditions will strengthen somewhat further. Inflation is expected to further, and inflation will rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. term. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.
In view of realized and expected labor market conditions and inflation, the Committee decided to raise maintain the target range for the federal funds rate to at 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to 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. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
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, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Charles L. Evans; Stanley Fischer; Esther L. George; Loretta J. Mester; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo.
Implementation Note issued February 1, 2017
Implementation Note issued December 14, 2016
Our summary
What changed
- The FOMC decided to maintain the target range for the federal funds rate at 1/2 to 3/4 percent, after raising it in December.
- Economic language updated: job gains remained solid, unemployment stayed near recent low, and consumer and business sentiment improved of late.
- Inflation language revised: inflation increased in recent quarters, and market-based inflation compensation remain low, dropping the 'moved up considerably' phrasing.
- Voting members changed: Charles Evans, Patrick Harker, Robert Kaplan, and Neel Kashkari replaced James Bullard, Esther George, Loretta Mester, and Eric Rosengren.
Implications
The decision to hold rates steady signals a pause after the December hike, with the FOMC emphasizing gradual future adjustments.
Improved sentiment and steady labor market language suggest a slightly more optimistic outlook, but low inflation compensation keeps the FOMC cautious.
The unchanged forward guidance on gradual increases and balance sheet reinvestment indicates no imminent policy shift.
Summary generated automatically from the statements. Not investment advice.
Implementation Note
The settings that put the decision into effect: the interest rate paid on reserves, the FOMC's instructions to the New York Fed's trading desk, and the discount rate. Changes are marked the same way as in the statement.
- The Board of Governors of the Federal Reserve System voted unanimously to
raisemaintain the interest rate paid on required and excess reserve balancestoat 0.75percent, effective December 15, 2016.percent. - As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive: "Effective
December 15, 2016,February 2, 2017, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1/2 to 3/4 percent, including overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 0.50 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day. The Committee directs the Desk to continue rolling over maturing Treasury securities at auction and to continue reinvesting principal payments on all agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency mortgage-backed securities transactions." More information regarding open market operations may be found on the Federal Reserve Bank of New York's website. - In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 1.25 percent.
In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve a 1/4 percentage point increase in the discount rate (the primary credit rate) to 1.25 percent, effective December 15, 2016. In taking this action, the Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Kansas City, Dallas, and San Francisco.