May 3, 2017 FOMC Statement

Target range 0.75–1.00% unchanged Vote 9–0 Tone: Leaning dovish -0.30

At a glance·Statement·Our summary·Implementation Note

FOMC statement

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EDT

Information received since the Federal Open Market Committee met in ~~February~~ March indicates that the labor market has continued to strengthen ~~and that~~ even as growth in economic activity ~~has continued to expand at a moderate pace.~~ slowed. Job gains ~~remained solid~~ were solid, on average, in recent months, and the unemployment rate ~~was little changed in recent months.~~ declined. Household spending ~~has~~ rose only modestly, but the fundamentals underpinning the continued ~~to rise moderately while business~~ growth of consumption remained solid. Business fixed investment ~~appears to have firmed somewhat.~~ firmed. Inflation measured on a 12-month basis recently has ~~increased in recent quarters, moving~~ been running close to the Committee's 2 percent longer-run ~~objective; excluding~~ objective. Excluding energy and ~~food prices, inflation was little changed~~ food, consumer prices declined in March and inflation continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee ~~expects~~ views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium 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 3/4 to 1 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained 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. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant 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; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. ~~Powell; and Daniel K. Tarullo. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate.~~ Powell.

Implementation Note issued ~~March 15,~~ May 3, 2017

Source

Our summary

What changed

The FOMC decided to maintain the target range for the federal funds rate at 3/4 to 1 percent, rather than raising it as in March.
The statement notes that growth in economic activity slowed, but views the first-quarter slowing as likely transitory.
It reports that the unemployment rate declined and that consumer prices excluding energy and food declined in March.
The vote was unanimous, with no dissents; Neel Kashkari voted with the majority this time, unlike in March.

Implications

The unchanged rate and the characterization of the slowdown as transitory suggest the FOMC is pausing to assess data before further hikes, while keeping a gradual tightening bias. Markets may interpret the unanimous vote as reducing near-term policy uncertainty.

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 ~~raise~~ maintain the interest rate paid on required and excess reserve balances to at 1.00 ~~percent, effective March 16, 2017.~~ 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 ~~March 16,~~ May 4, 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 3/4 to 1 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 0.75 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 1.50 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 primary credit rate to 1.50 percent, effective March 16, 2017. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, Dallas, and San Francisco.

Source