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July 26, 2017 June 14, 2017

Statement·Presser·Minutes

JYJanet L. Yellen

July 26, 2017 FOMC Statement

Target range 1.00–1.25% unchanged Vote 9–0 Tone: Balanced -0.19
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 May June indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has have continued to expand. On a 12-month basis, overall inflation has declined recently and, like and the measure excluding food and energy prices, is prices have declined and are 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 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. 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, but the Committee is monitoring inflation developments closely.

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 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 For the time being, 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. The Committee currently expects to begin implementing a its balance sheet normalization program this year, relatively soon, provided that the economy evolves broadly as anticipated. This program, which would gradually reduce the Federal Reserve's securities holdings by decreasing reinvestment of principal payments from those securities, anticipated; this program is described in the accompanying addendum June 2017 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 June 14, July 26, 2017

Source

Our summary

What changed

  • The FOMC decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent, rather than raising it as in June.
  • Language on inflation was revised: overall inflation and the measure excluding food and energy have declined and are running below 2 percent, replacing the prior description of inflation declining recently and running somewhat below 2 percent.
  • The balance sheet normalization program is now expected to begin 'relatively soon,' a shift from 'this year' in the previous statement.
  • The reinvestment policy is described as maintained 'for the time being,' a slight change from the prior wording.
  • The vote was unanimous; Neel Kashkari, who dissented in June, now voted with the majority.

Implications

The shift to 'relatively soon' for balance sheet normalization suggests the FOMC is moving closer to announcing the start of the program, likely at a coming meeting.

The unanimous vote and unchanged rate signal a pause in tightening, with the FOMC emphasizing inflation running below target, which may temper expectations for near-term hikes.

The revised inflation language underscores concern about low inflation, reinforcing the FOMC's stated monitoring of inflation developments.

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.

Source