June 14, 2017
May 03, 2017
Statement·Presser·Minutes·Policy
JYJanet L. YellenJune 14, 2017 FOMC Statement
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 March May indicates that the labor market has continued to strengthen even as growth in and that economic activity slowed. has been rising moderately so far this year. Job gains were have moderated but have been solid, on average, in recent months, since the beginning of the year, and the unemployment rate has declined. Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid. Business has picked up in recent months, and business fixed investment firmed. Inflation measured on has continued to expand. On a 12-month basis recently basis, inflation has been running close to the Committee's 2 percent longer-run objective. Excluding energy and food, consumer prices declined in March recently and, like the measure excluding food and inflation continued to run energy prices, is running 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 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, and labor market conditions will strengthen somewhat further, and inflation will further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced. The balanced, but the Committee continues to closely monitor is monitoring inflation indicators and global economic and financial developments. developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain raise the target range for the federal funds rate at 3/4 to 1 to 1-1/4 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 auction. The Committee currently expects to begin implementing a balance sheet normalization of program this year, provided that the level of the federal funds rate is well under way. economy evolves broadly as anticipated. This policy, by keeping program, which would gradually reduce the Committee's Federal Reserve's securities holdings by decreasing reinvestment of longer-term securities at sizable levels, should help maintain accommodative financial conditions. principal payments from those securities, is described in the accompanying addendum to the Committee's Policy Normalization Principles and Plans.
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. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate.
Implementation Note issued May 3, June 14, 2017
Our summary
What changed
- Raised the federal funds rate target range to 1 to 1-1/4 percent, from 3/4 to 1 percent.
- Upgraded the economic assessment: activity rising moderately, household spending picked up, and business investment continued to expand.
- Noted inflation has declined recently and is running somewhat below 2 percent, with expectations for it to remain below in the near term.
- Announced plans to begin balance sheet normalization this year, gradually reducing securities holdings by decreasing reinvestment of principal payments.
- Neel Kashkari dissented, preferring to maintain the existing target range.
Implications
The statement signals a continued gradual tightening path, with the rate hike accompanied by a plan to unwind the balance sheet later this year.
The downgrade in inflation language suggests the FOMC is acknowledging softer price pressures but still expects them to stabilize around 2 percent over the medium term.
Markets may interpret the balance sheet announcement as a step toward policy normalization, potentially influencing expectations for future rate hikes.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2017 | 2018 | 2019 | Longer run | |
|---|---|---|---|---|
| Real GDP growth | 2.2 was 2.1 | 2.1 | 1.9 | 1.8 |
| Unemployment rate | 4.3 was 4.5 | 4.2 was 4.5 | 4.2 was 4.5 | 4.6 was 4.7 |
| PCE inflation | 1.6 was 1.9 | 2.0 | 2.0 | 2.0 |
| Core PCE inflation | 1.7 was 1.9 | 2.0 | 2.0 | |
| Federal funds rate | 1.4 | 2.1 | 2.9 was 3.0 | 3.0 |
Median projections of FOMC participants; previous: March.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
June March median March median
Scroll the chart sideways for the later years.
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
maintainraise the interest rate paid on required and excess reserve balancesat 1.00 percent.to 1.25 percent, effective June 15, 2017. - 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
May 4,June 15, 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 of3/4 to1 to 1-1/4 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 of0.751.00 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 aper-counterpartyper‑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 a 1/4 percentage point increase in the
establishment of theprimary credit rateatto 1.75 percent, effective June 15, 2017. In taking this action, theexisting levelBoard approved requests to establish that rate submitted by the Boards of1.50 percent.Directors of the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, Dallas, and San Francisco.
Press conference
June 14, 2017, 2:30 p.m. ET · Read the transcript
What Yellen said that the statement didn't
- The chair said the FOMC's decision to raise rates reflects progress toward maximum employment and price stability, and that the stance of policy remains accommodative.
- The chair noted that job gains have averaged about 160,000 per month since the start of the year, a solid rate well above the pace needed to absorb new labor force entrants.
- The chair explained that recent low inflation readings were driven significantly by one-off price declines in categories like wireless telephone services and prescription drugs, which will restrain 12-month inflation until the low March reading drops out.
- The chair stated that the median projection for the federal funds rate is 1.4 percent at the end of this year, 2.1 percent at the end of next year, and 2.9 percent at the end of 2019.
- The chair said the balance sheet normalization caps will initially be $6 billion per month for Treasuries and $4 billion per month for agencies, rising gradually to $30 billion and $20 billion, respectively, over a year.
Summary generated automatically from the transcript and the statement.