September 20, 2017
July 26, 2017
September 20, 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 June July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have been solid, on average, since the beginning of the year, remained solid in recent months, and the unemployment rate has declined. stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment have continued to expand. has picked up in recent quarters. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running 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 Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, 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 Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, 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 maintain the target range for the federal funds rate 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.
In October, the Committee will initiate the balance sheet normalization program described in the 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.
Implementation Note issued July 26, September 20, 2017
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 expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated; this program is described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.
Our summary
What changed
- The FOMC maintained the target range for the federal funds rate at 1 to 1-1/4 percent, unchanged from the previous statement.
- The statement now references hurricanes Harvey, Irma, and Maria, noting they will affect near-term economic activity but are unlikely to materially alter the medium-term national economy.
- Inflation language was updated to note that hurricane-related gasoline price increases will likely boost inflation temporarily, apart from which inflation remains below 2 percent.
- The balance sheet normalization program is now scheduled to initiate in October, replacing the previous language of beginning 'relatively soon' contingent on economic evolution.
- The vote remained unanimous with the same nine members as the previous statement.
Implications
The shift from 'relatively soon' to a specific October start for balance sheet normalization signals a firm commitment to begin reducing the balance sheet, suggesting policy normalization is proceeding as planned.
The hurricane-related language indicates the FOMC views the storms as temporary disruptions, not altering the medium-term outlook, which may reduce market concerns about their economic impact.
The unchanged rate decision and continued expectation of gradual increases suggest the FOMC remains on a gradual tightening path, with the balance sheet move likely to be seen as a step toward policy normalization.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2017 | 2018 | 2019 | 2020 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 2.4 was 2.2 | 2.1 | 2.0 was 1.9 | 1.8 | 1.8 |
| Unemployment rate | 4.3 | 4.1 was 4.2 | 4.1 was 4.2 | 4.2 | 4.6 |
| PCE inflation | 1.6 | 1.9 was 2.0 | 2.0 | 2.0 | 2.0 |
| Core PCE inflation | 1.5 was 1.7 | 1.9 was 2.0 | 2.0 | 2.0 | |
| Federal funds rate | 1.4 | 2.1 | 2.7 was 2.9 | 2.9 | 2.8 was 3.0 |
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.
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 maintain the interest rate paid on required and excess reserve balances at 1.25 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
July 27,September 21, 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 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 of 1.00 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 a per-counterparty limit of $30 billion per day. The Committee directs the Desk to continue rolling overmaturing Treasury securitiesat auction Treasury securities maturing during September, and to continue reinvesting in agency mortgage-backed securities the principal paymentson allreceived through September from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities. Effective in October 2017, the Committee directs the Desk to roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing during each calendar month that exceeds $6 billion, and to reinvest in agency mortgage-backedsecurities.securities the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month that exceeds $4 billion. Small deviations from these amounts for operational reasons are acceptable. 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 1.75 percent.
Press conference
September 20, 2017, 2:30 p.m. ET · Read the transcript
What Yellen said that the statement didn't
- The chair said that the median projection for real GDP growth is 2.4 percent in 2017, about 2 percent in 2018 and 2019, and 1.8 percent in 2020.
- The chair said that the median projection for the unemployment rate is 4.3 percent in the fourth quarter of 2017 and runs a little above 4 percent over the next three years.
- The chair said that the median projection for inflation is 1.6 percent in 2017, 1.9 percent in 2018, and 2 percent in 2019 and 2020.
- The chair said that the median projection for the federal funds rate is 1.4 percent at the end of 2017, 2.1 percent at the end of 2018, 2.7 percent at the end of 2019, and 2.9 percent in 2020.
- The chair said that the balance sheet normalization program will cap the decline in securities holdings at $6 billion per month for Treasuries and $4 billion per month for agencies from October through December, with caps rising to $30 billion and $20 billion per month, respectively, over the following year.
Summary generated automatically from the transcript and the statement.